[Senate Hearing 108-274]
[From the U.S. Government Publishing Office]
S. Hrg. 108-274
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
on
H.R. 2989/S. 1589
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
TREASURY, AND INDEPENDENT AGENCIES FOR THE FISCAL YEAR ENDING SEPTEMBER
30, 2004, AND FOR OTHER PURPOSES
__________
Department of the Treasury
Department of Transportation
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
__________
85-941 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
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COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas MARY L. LANDRIEU, Louisiana
James W. Morhard, Staff Director
Lisa Sutherland, Deputy Staff Director
Terence E. Sauvain, Minority Staff Director
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Subcommittee on Transportation, Treasury and General Government, and
Related Agencies
RICHARD C. SHELBY, Alabama, Chairman
ARLEN SPECTER, Pennsylvania PATTY MURRAY, Washington
CHRISTOPHER S. BOND, Missouri ROBERT C. BYRD, West Virginia
ROBERT F. BENNETT, Utah BARBARA A. MIKULSKI, Maryland
BEN NIGHTHORSE CAMPBELL, Colorado HARRY REID, Nevada
KAY BAILEY HUTCHISON, Texas HERB KOHL, Wisconsin
MIKE DeWINE, Ohio RICHARD J. DURBIN, Illinois
SAM BROWNBACK, Kansas BYRON L. DORGAN, North Dakota
TED STEVENS, Alaska (ex officio)
Professional Staff
Paul Doerrer
Lula Edwards
Shannon Hines
Peter Rogoff (Minority)
Kate Hallahan (Minority)
Diana Gourlay Hamilton (Minority)
Administrative Support
Jacqueline Esai
Meaghan L. McCarthy (Minority)
C O N T E N T S
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Wednesday, April 2, 2003
Page
Department of Transportation:
Federal Aviation Administration.............................. 1
Office of the Inspector General.............................. 13
Office of the Secretary...................................... 29
Wednesday, April 9, 2003
Department of the Treasury: Internal Revenue Service............. 73
Thursday, May 8, 2003
Department of Transportation..................................... 119
Tuesday, May 20, 2003
Department of the Treasury: Office of the Secretary.............. 175
Thursday, May 22, 2003
Department of Transportation:
National Highway Transportation Safety Administration........ 221
Federal Motor Carrier Safety Administration.................. 235
Nondepartmental Witnesses........................................ 242
Nondepartmental Witnesses........................................ 301
Material Submitted Subsequent to Conclusion of Hearings.......... 325
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
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WEDNESDAY, APRIL 2, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:33 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Richard C. Shelby (chairman)
presiding.
Present: Senators Shelby, Bennett, Murray, and Dorgan.
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
STATEMENT OF MARION C. BLAKEY, ADMINISTRATOR
opening statement of senator richard c. shelby
Senator Shelby. Good morning. The hearing is called to
order.
Every year when it comes time to hold hearings on the
upcoming fiscal year's budget request, it is likely that we
will cover some of the same old ground. But, unlike other
agencies or departments, the nature of the industry and
facilities that the FAA regulates seem to be in a constant
state of change.
A few years ago we were concerned about hub concentration
and the anti-competitive behavior. More recently, we turned our
concern to airline treatment of passengers and system-wide
delays. Now, we wonder where all the passengers have gone,
whether the hubs will survive, and if the traditional airline
structure will remain intact or if we will see something
substantially different emerge as a result of all the upheaval.
This is a very difficult time for virtually everyone
involved in aviation: the passengers, communities, airports,
airlines, aircraft manufacturers and the FAA. Passengers are
anxious about flying in the aftermath of the September 11th
attacks. The terrorist threat alerts exacerbate people's fears
about the vulnerability of our air transportation system to
terrorism attack, and military operations to free Iraq have
further increased the public's concern about the safety of
flying.
In addition, passengers are facing fewer choices in flight
options as the air transportation market undergoes the first
significant service contraction since deregulation.
Airports face increased operational and capital costs as
they respond to increased security requirements at the same
time that their revenues are declining because of reductions in
flights, reduced revenues from concessionaires, and fewer
passengers.
Communities that were struggling to maintain service levels
are finding that challenge even more daunting as the fixed
costs of initiating or maintaining a marginally justified
service continue to rise.
Airlines not already in bankruptcy or headed into
bankruptcy have little to be optimistic about. As an industry,
air carriers did not have time to recover after the September
11th attacks and the sluggish economy that we have experienced
for the past 3 years has compounded an already difficult
financial situation.
Most carriers are not predicting meaningful growth in
traffic or bookings for several months after the Iraq war is
favorably concluded, and many more are not anticipating a
firming in the yields for more than a year. Clearly, this is an
industry on the ropes.
Aircraft manufacturers, for their part, are typically the
first to feel the slowdown and the last to recover from it.
Neither Boeing nor Airbus anticipates an upturn in the demand
for aircraft until the middle of 2004 at the earliest. Airbus
is struggling with the challenges of keeping the new A-380
within their revised cost and weight estimates, and Boeing is
undertaking an aggressive new aircraft program with the 7E7 and
is marshalling $10 billion to develop it. Clearly, both
manufacturers are feeling the pressure of the industry
downturn, but both are looking to the future.
This brings us to the FAA. Administrator Blakey, you have
now been at the FAA just long enough to start putting your
imprint on that organization and begin shaping your vision of
what you want that agency to achieve under your stewardship.
I feel certain that you have begun turning the programs,
budgets, policy, and regulatory processes and directed the
career personnel to your vision of where the agency should head
to support a safe and efficient air transportation system.
I know that this budget was largely completed before you
became administrator, and I know that the budget constraints
that we face make your job even more difficult. But I would
like to explore with you where we are going to take the FAA in
the next several years. The budget request for FAA operations
anticipates an 8.1 percent growth, but it seems to me to be a
current services budget with few new initiatives.
That kind of growth to deliver the same services, I
believe, will be hard to justify or secure in the current
environment.
I believe it is important to show what the FAA is doing to
foster a safe and efficient system as we move forward. We need
to show how the FAA is responding to the evolving air
transportation system. We need to show what works in the FAA.
We need to know where we need to reinvigorate our efforts. And
we need to show where we can save and redirect sources to
higher priorities.
More importantly, we need to show how the FAA program is
changing in the aftermath of the 9/11 terrorist attacks. I am
told that the agency's Operational Evolution Plan (OEP) has not
evolved since that time and that troubles me. None of these
things can be done if we sit passively by and expect that
things will just work themselves out. It is imperative that the
FAA, that our government, implement innovative and aggressive
approaches to dealing with our rapidly changing world.
I want to work with you to help make the FAA responsive to
the needs of the public and the industry it regulates.
Today we are pleased to have Marion Blakey, the
Administrator of the Federal Aviation Administration; Ken Mead,
the Department of Transportation Inspector General; and Jeff
Shane, the Under Secretary for Policy at the Department of
Transportation as our witnesses.
Senator Murray?
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Thank you, Mr. Chairman, and I want to
thank you for calling this hearing on the aviation industry.
Our airlines, our airports, and our employees are facing an
immediate crisis and they need our help. Thousands of hard-
working Americans are being put out on the streets every week
by the airlines or their suppliers. At home, tens of thousands
of my constituents have lost their jobs because of the downturn
in air travel. Together, these companies and their employees
have faced the triple whammy of September 11th, a deteriorating
economy, and now the war with Iraq. It is difficult to
overstate the seriousness of the crisis facing this vital part
of our Nation's transportation infrastructure.
Some carriers are emerging from bankruptcy. Others are
entering it. And still others are desperately trying to avoid
it. Some retired airline employees are seeing their monthly
pension checks cut dramatically. And one of our Nation's
largest carriers is facing the very real possibility of
liquidation.
In just a half an hour from now the Senate will begin
debating the war supplemental that we marked up in the
Appropriations Committee yesterday. Yesterday, during markup, I
offered an amendment to increase the size of the aviation
relief package from $2.8 billion to $3.5 billion dollars. I am
pleased that that amendment was adopted and that the full bill
passed the committee on a unanimous and bipartisan basis. My
amendment expanded the amount of relief provided to our
airlines and addressed two gaping holes in the original
proposal, the absence of assistance for our airports and the
absence of help for the workers who have suffered the most
during this crisis.
While our committee was reporting the war supplemental with
$3.5 billion dollars in overall aviation relief, the House
Appropriations Committee reported its version of the
supplemental with roughly $3.2 billion in assistance. The House
Committee version, however, did not include any help for
workers.
The Administration's supplemental budget request included
absolutely nothing for our airlines, our airports, or our
aviation workers. Since then we have heard from the OMB
Director and others that the Administration would not close the
door on some form of aviation relief.
Unfortunately, it has not been clear what, if anything, the
Bush Administration wants to do to address the crisis in our
aviation industry.
That was until today. Today, we read that senior Bush
Administration officials think that the packages approved by
the House and Senate committees were too large and wrong-
headed. Transportation Secretary Norm Mineta is quoted in the
New York Times this morning saying that our committee's actions
yesterday--and I quote--``show that a considerable gulf remains
between Congress and the Administration regarding the amount
and structure of this assistance.''
Commerce Secretary Don Evans was quoted in an Associated
Press (AP) story today saying we will work with the Congress to
ensure that the airlines receive more reasonable assistance.
I fear that the Administration is long on rhetoric but
short on detail. Time and again we hear that the Administration
has a position, but they just do not tell Congress or the
American people what it is.
Workers have lost their jobs. They are trying to figure out
how to pay the mortgage this month. But instead of offering
support, the Administration is failing them.
Mr. Chairman, this morning we are joined by President
Bush's Under Secretary for Transportation Policy. I hope that
this morning we will find out what the Bush Administration
finds unreasonable in the committees' assistance package.
I have carefully reviewed the Under Secretary's formal
testimony and I did not find any answers to those questions. I
did find some nice multicolored charts documenting the problem,
and a commitment by the Administration to continue to monitor
the situation.
I hope the President does not object to helping thousands
of workers who have lost their jobs through no fault of their
own.
I want to put this in context. At a time when the President
has proposed $700 billion more in tax cuts, I would hope he
could find it in his heart to support less than \1/20\ of 1
percent of that amount for our laid off workers.
And I would remind the Administration that 10,000 aviation
industry workers have gotten pink slips since the start of the
Iraq war.
I hope during our questions this morning we will finally
get some clear answers on precisely where the Bush
Administration stands on Congressional efforts to help this
industry and its workers.
Let me close, Mr. Chairman, with another area where the
Administration can do more, and that is carefully monitoring
aviation safety. Many years ago, as we all know, during the
bankruptcy and liquidation of Eastern Airlines, we learned that
air carriers in difficult financial condition could be tempted
to cut corners in the critical areas of maintenance and safety
compliance.
It is the job of Administrator Blakey, who is here with us,
to see that does not happen again. And it is the job of the
Inspector General to make sure that Mrs. Blakey is doing her
job.
So I look forward to asking both of them whether we should
be concerned that the financial downturn in this industry could
impact the overall safety of our aviation system.
Thank you, Mr. Chairman. I look forward to the questions.
Senator Shelby. Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman. I do not have an
opening statement and I look forward to hearing the witnesses
and I will have some questions.
Senator Shelby. Ms. Blakey, you will be first. Your written
statement will be made part of the record, all of your written
statement in its entirety. You can proceed as you wish. We
welcome you to the committee.
STATEMENT OF MARION C. BLAKEY
Ms. Blakey. Thank you very much, Chairman Shelby, Senator
Murray, Senator Bennett.
I very much appreciate the opportunity to testify before
you today. And it is a pleasure because this is my first
opportunity as the Administrator of the Federal Aviation
Administration.
Before I begin, I have to acknowledge the new Chairman of
this committee, Senator Shelby, who hails from the great State
of Alabama. Since that is where I got this accent, you can
appreciate the fact that I am really looking forward to working
with you.
Senator Shelby. I was enjoying your speech.
Ms. Blakey. I hope so. I also would like to thank Ken Mead
and our Under Secretary for Policy, Jeff Shane for the enormous
amount of work they put into working with us at the FAA to
ensure that we are doing the right thing for the aviation
system.
REAUTHORIZATION PROPOSAL
On March 25th, Secretary Mineta sent to Congress the
Administration's new reauthorization proposal. The Centennial
of Flight Aviation Authorization Act or Flight 100, as we like
to call it. Secretary Mineta has challenged the Department and
the FAA to be safer, simpler, and smarter, as he puts it. And I
think these guiding principles, you will find, do form the
basis for Flight 100, as we move to provide better performance,
more flexibility, and increased accountability.
To that end, we believe the Administration's proposal will
serve as a strong foundation for the development of the
reauthorization legislation because it builds on AIR-21, which
I know you all worked very hard on. It also provides the kind
of funding levels that will support important infrastructure
improvements, safety initiatives, system efficiencies, and
important research in the safety area. Most importantly, I
would stress to you that Flight 100 adds no additional taxes,
no economic demands on the ailing industry, and no new
financial burdens for the American flying public.
FISCAL YEAR 2004 BUDGET REQUEST
Now, let me turn my attention to the purpose of today's
hearing, or at least in part the purpose, and that is the
President's 2004 budget for the FAA. The President has proposed
a budget of $14 billion for the FAA, a lean budget but I
believe a generous one, given these challenging times.
Specifically, his budget requests $7.6 billion for
Operations, $2.9 billion for Facilities and Equipment, $3.4
billion for Airport Improvement Grants, and $100 million for
Research, Engineering and Development. This represents a 3.7
percent increase from the 2003 enacted budget and provides
funding for the 49,745 employees that work for the FAA.
SAFETY
Let me turn initially and most importantly to not only my
number one priority, but I firmly believe the number one
priority of this committee, and that is safety. The United
States has a remarkable safety record in aviation. Almost 100
years after the Wright brothers first took to the skies, I am
pleased to report that 2002 was one of the safest years in
aviation history. Not a single fatality occurred on a U.S.
commercial airline.
We are all proud of this achievement, but I know that none
of us think we can rest on our laurels on this, either. Every
day at the FAA we help to ensure the safety of an airline
industry that is in serious economic peril. I know we all agree
that safety cannot be shortchanged. No matter how tough the
economic circumstances become, we have got to keep it in front
of us.
For this reason, out of a total budget request of $14
billion, $8.7 billion will be used to support the FAA's safety
goals. Full funding of the President's budget will provide
needed funds for inspecting aircraft, operating and maintaining
the air traffic control system, including hiring 302 additional
air traffic controllers in anticipation of the retirements that
we expect in that workforce.
Funds are also provided for inspecting hazardous materials,
making additional AIP grants for airport safety, capacity, and
security investments, noise mitigation, safety research, and I
could go on.
But the point here is that specifically in the area of
commercial aviation, we have a number of programs and
initiatives that have been particularly responsible for the
remarkable safety record I was alluding to. The FAA's Runway
Safety Program has helped significantly reduce the number of
high risk runway incursions, which of course lowers the risk of
collisions. Runway incursions declined from 407 in 2001 to 339
in fiscal year 2002. The number of high risk incursions fell
from 58 to 37.
The Airport Movement Area Safety System, AMASS, is now
operational in 31 airports. And I am happy to say it has
occasioned saves in San Francisco, Boston, and Detroit.
The Safer Skies Initiative is a joint Government and
industry effort to reduce commercial fatal accidents by 80
percent by 2007. We have made significant progress on this very
aggressive goal, and we are on track to meet it.
Now, I know no one here can forget the tragedy of TWA 800.
This accident focused national attention on the critical need
to improve fuel tank safety. For a number of years my old
agency, the National Transportation Safety Board (NTSB), and
others have been calling for a way to remove flammable oxygen
from fuel tanks and substitute inert gas which would, of
course, eliminate the explosion potential. But the designs were
always deemed too heavy, too complicated, and too expensive to
be viable.
Building on previous research on ground-based inerting, the
FAA's researchers recently developed a relatively simple but
effective way to generate nitrogen enriched air in flight. That
is why I have this in front of me. It is a very, very simple
solution, one that involves no moving parts, one that is not
heavy. Even at full scale, the inerting system that the FAA's
research has developed will be less than a single passenger on
board a flight, in terms of weight.
We are going to flight test the system next month. If it
goes as we expect, it is going to be a major improvement in
terms of aviation safety. So it is just one example of the kind
of things that the funds that you all appropriate, make a real
difference.
CAPACITY
Let me turn to capacity for a moment. I am very fond of the
saying that the Aircraft Owner and Pilots Association likes,
which is that a mile of road will get you a mile. A mile of
runway will get you anywhere. It is something I think we have
to remember as we are looking at capacity issues.
Given the current downturn, we do have a unique opportunity
right now to increase capacity before we return to the pre-9/11
traffic levels. Increasing capacity, as you well know, can be
accomplished in basically three ways: new technology, new
operations, new pavement. That is what it really comes down to.
We have to have all three. If we invest in them wisely, I am
convinced that we are going to have the capacity we need.
Our Operational Evolution Plan calls for a 31 percent
increase in capacity by 2010, and it is yielding results. We
have a brand new version of the plan that I would love an
opportunity to brief you all on, because it has identified
choke points in the system and developed a much more intensive,
dynamic communication system with the airlines that is really
yielding a lot of results. We are seeing real changes in terms
of bottom line efficiencies for the airlines in a way we never
did before.
From the standpoint of new technology, and new procedures,
the User Request Evaluation Tool gives controllers the ability
to approve direct routes and is saving time and saving fuel.
We are also seeing terrific results from our new Traffic
Management Advisor which gives us a way to control traffic at
our busiest airports, in a way again that is promoting great
efficiency.
What about the tough one, which is new pavement? The FAA's
Operational Evolution Plan is tracking now on 12 airport
projects that are scheduled for completion in the next 10
years. And the terrific news is four of them are going to come
online this year--Houston, Denver, Miami and Orlando. They are
all still on track to open this year. So that is really a major
improvement for the system.
Additionally, the President's Executive Order on
Environmental Streamlining, and the $3.4 billion investment
included in the budget for AIP program funding, demonstrates
the Administration's commitment to expanding capacity. With
this level of funding and with some structural changes in the
AIP formulas, the Administration is going to be better able to
target projects of national significance while at the same time
helping our smaller airports.
FINANCIAL MANAGEMENT AND COSTS CONTROL
Finally, it is clear to all of us at the FAA, that we have
to do a better job managing our finances and controlling our
costs. Certainly, the Inspector General has called this to our
attention and, as they say, we get it. I am pleased to report
that the FAA has recently received another unqualified or clean
audit opinion on our 2002 consolidated financial statements. I
am also proud to say it is the second year in a row that this
has happened. It gives us a firm foundation that we need to
implement a new financial system that is coming online this
fall, DELPHI, which will continue to help us implement a cost
accounting system that means something.
Just as our safety decisions have to be driven by data, so
must our management decisions as well. We now track 80 percent
of our costs on a monthly basis at the FAA. But we have got to
do a better job of using the data to manage those costs. As
part of the cost accounting system, we are implementing a labor
distribution system as well in the Air Traffic Services line of
business. It is called Cru-X.
It is our commitment to also track, control, and look at
the issue of how we are distributing our labor costs. Our air
traffic controller workforce will use this data to assess
controllers' workload and figure out whether we are hitting the
performance measures we want to.
Recently, the Inspector General noted that the system needs
to be improved. We agree. I am committed to making the changes
we need to ensure the integrity of the cost information. With
budget shortfalls and depleting trust fund revenues, we have to
be diligent stewards of the public funds.
PERFORMANCE-BASED PAY SYSTEM
Furthermore, the FAA has worked hard to implement a
performance-based pay system. You all gave us personnel reform
and we are working very hard to take advantage of the
flexibility it provides. But we have got a ways to go.
Approximately 36 percent of our workforce right now is
currently under the performance-based system. It is intended
and will link the organizational goals that we are developing
in the strategic planning process we are undertaking right now,
so that every single individual has a clear line of sight from
their job to what the organization sets out to do. I pledge you
my commitment to implementing this system across the entire
FAA.
PREPARED STATEMENT
With that, I will conclude the prepared statement and look
forward to questions. Thank you.
[The statement follows:]
Prepared Statement of Marion C. Blakey
Chairman Shelby, Senator Murray, Members of the Subcommittee: Thank
you for the opportunity to appear before you today to discuss the
Federal Aviation Administration (FAA) and our budget request for fiscal
year 2004. Before we begin, I would like to acknowledge the new
Chairman of this Subcommittee, Senator Shelby from the great State of
Alabama. I look forward to working closely with you as well as the
other Members of this Subcommittee during my tenure as FAA
Administrator. Finally, I would also like to recognize Kenneth Mead,
Inspector General for the Department of Transportation. Thank you, Ken,
for your commitment to work jointly with us to tackle our most pressing
financial and performance challenges.
In the seven months I have served as Administrator, I have had the
privilege to lead an agency whose mission is second to none--the safety
of our Nation's aviation system. Our mission is carried out by
thousands of talented, energetic, and dedicated employees who care
about the safety of the American people and our mission. It is an honor
to represent them here today.
We at the FAA operate and maintain the Nation's complex air traffic
control system and the facilities and equipment that enable its optimal
operation. Our controllers control and monitor more than half of the
world's air traffic--up to 5,000 aircraft in U.S. airspace at any given
moment. FAA conducts state-of-the art research to continually improve
safety and efficiency. We help improve the safety and capacity of more
than 5,000 public-use airports in the United States. Our inspectors
oversee more than 7,000 operators, including 139 major air carriers.
Our maintenance technicians perform the maintenance, repair and
engineering of over 62,000 facilities and pieces of equipment.
REAUTHORIZATION
I am pleased to say that on March 25, Secretary Mineta sent to
Congress the Administration's reauthorization proposal--the Centennial
of Flight Aviation Authorization Act, or Flight-100. I would like to
thank Secretary Mineta and Deputy Secretary Jackson for their
commitment and dedication to developing and supporting Flight-100.
I also want to thank them for their tremendous efforts in
challenging the Agency to be Safer, Simpler, and Smarter. These three
principles form the basis of Flight-100, but they also form the
cornerstone of the entire Agency's mission--better performance, more
flexibility, and increased accountability. Later in my remarks, I will
address several of the Agency initiatives designed to meet these
challenges.
To that end, we believe that the Administration's proposal will
serve as a strong foundation for the development of reauthorization
legislation. It builds upon AIR-21 in that it maintains our commitment
to safety, capacity, and system efficiency. The funding levels in
Flight-100 continue to support important infrastructure improvements,
safety initiatives, system efficiencies and safety research. It adds no
additional taxes, no economic demands on an economically troubled
industry, and it provides no new financial burdens on the American
people. I thank you for your consideration of Flight-100, and I look
forward to continuing the dialogue on this, our blueprint for aviation
in the future.
BUDGET
Let me now turn my attention to the purpose of our meeting today--
the 2004 President's Budget. Our budget supports Flight-100 in that it
contributes to our efforts to be Safer, Simpler, and Smarter.
To support our operations and capital investments, the President
has proposed a fiscal year 2004 budget of $14 billion--a lean budget,
but generous given these challenging times. Specifically, his budget
requests $7.6 billion for operations, $2.9 billion for facilities and
equipment, $3.4 billion for airport grants, and $100 million for
research and development.
This represents a 3.7 percent increase from the 2003 enacted
budget. Funding will support 49,748 employees.
I want to thank all the members of this Subcommittee for your
tireless efforts and continued dedication to supporting the FAA's
funding needs. Fully enacting the President's budget will permit the
FAA to hire more controllers to prepare for an expected surge in
retirements, make needed improvements in the National Airspace System
(NAS), and fund safety, capacity, and security improvements at our
Nation's airports. Your support for these investments will reap
benefits for years to come, as FAA provides a safe and efficient
aviation system that contributes to national security, promotes
economic growth, and encourages the recovery of civil aviation.
SAFER, SIMPLER, SMARTER
Safety
First, let me address my number one priority, and that of every FAA
employee--safety, both in the skies and on the ground. Under the superb
leadership of Secretary Mineta, the Department's emphasis on safety has
never been greater. The United States has a remarkable safety record.
Almost 100 years after the Wright Brothers first took to the skies, FAA
is proud to report that calendar year 2002 was one of the safest years
in the history of the U.S. airlines, not a single fatal air carrier
accident, and we continue to make progress in reducing the number of
general aviation fatal accidents. We are proud of this achievement, but
we will not rest on our laurels.
Safety must always be our top priority, especially with the airline
industry in serious economic trouble. As a carrier reduces its
schedule, its fleet and its personnel, we must evaluate the impacts of
these reductions and amend our surveillance plans as necessary. I
recently met with the FAA managers overseeing USAirways and United
Airlines to ensure that we have appropriately expanded our review of
these carriers. The approach we are taking with these carriers is to
focus our safety oversight on areas that may be more at risk during a
financial crisis.
We will support the resurgence of the airline industry with some of
our most effective mechanisms--continuing our investments in building
capacity at our Nation's airports and putting safety first.
Out of a total budget request of $14 billion, $8.7 billion will be
used to support FAA safety goals. Full funding of the President's
Budget will provide needed funds for inspecting aircraft, expanding
safety programs and hiring an additional 20 safety staff; operating and
maintaining the air traffic control system; hiring 302 additional air
traffic controllers (in anticipation of the first wave of controller
retirements); returning the Hazardous Materials Program from TSA;
purchasing airport surface movement detection equipment; making AIP
grants for airport safety, capacity and security investments, as well
as for noise mitigation and research on aviation safety.
In commercial aviation safety, several programs and initiatives
were instrumental in reaching last year's high level of aviation
safety. The Runway Safety Program helped reduce the number of high-risk
runway incursions significantly, which in turn lessened the risk of
collisions. Runway incursions declined from 407 in fiscal year 2001 to
339 in fiscal year 2002 due to our aggressive actions to reduce these
incidents, and the number of high risk incursions fell from 53 in
fiscal year 2001 to 37. The Airport Movement Area Safety System
(AMASS), now operational at 31 major airports, has been officially
credited with saves at San Francisco, Boston, and Detroit.
Our Safer Skies initiative, a joint government and industry effort
to reduce commercial fatal accidents by 80 percent by 2007, made
significant progress in addressing a number of factors that cause air
carrier accidents. I am pleased to say that we are on track to
accomplish this goal.
The Air Transportation Oversight System (ATOS) is another tool to
increase air travel safety and, like Safer Skies, is targeted for
increased funding in the President's Budget. Under ATOS, in addition to
comparing carriers' performance to all the requirements of our
regulations, aviation safety inspectors evaluate air carrier systems
that impact safety. Using ATOS, we have identified weaknesses in air
carrier programs and made sure that the carrier took corrective
actions.
In fiscal year 2002, the FAA research program focused on key areas
to reduce the size, weight and complexity of fuel tank inerting system
designs. We developed a simple system to inert the critical fuel tanks
(heated center tanks) in transport airplanes. The system has virtually
no moving parts, resulting in high reliability, low installation
weight, and low operating costs. The FAA's R&D program and the sharing
of the data and system design have helped the industry, including the
Boeing Company pursue inerting systems for the transport airplane
fleet. The availability of a practical inerting system provides for a
balanced approach of ignition prevention and flammability reduction. In
fiscal year 2004, the research program will focus on high priority
safety projects.
We have also strengthened our international safety focus. We are
working with the International Civil Aviation Organization (ICAO), as
well as other members of the international aviation community, to
strengthen and further aviation safety. For example, ICAO and the Joint
Aviation Authorities are both involved in the Commercial Aviation
Safety Team (CAST), the commercial aviation side of Safer Skies. FAA
also initiated the Global Aviation Information Network (GAIN), a
program that promotes the global collection and sharing of safety
information.
Though progress has been made, we agree with the Inspector General
that more can be accomplished. We will continue to build upon our 2002
successes.
Security
Since the events of September 11, the focus of Congress and the
American people has been on security, and understandably so. You and
your colleagues should be applauded, along with TSA, on your joint
efforts to improve aviation security. By federalizing baggage
screeners, ensuring that all checked baggage is screened, and expanding
the Federal air marshal program, your efforts have made air travel much
more secure.
The FAA has played an important role by providing resources and in
successfully transitioning our former security programs to TSA. And we
continue to work closely with TSA to assure that our safety programs
are interrelated and coordinated with their security programs--without
redundancy and complications. We look forward to the healthy
continuation of our partnership to restore the faith of the American
people in aviation.
The President's Budget requests $198 million to secure FAA
facilities and electronic systems. This includes $145 million in
Operations to fund internal FAA security, including securing our many
information systems and background checks of staff. Internal security
is not a new activity, but was temporarily transferred to TSA in the
fiscal year 2003 budget. Fully funding the President's Budget request
would also provide 26 new controllers to support the North American Air
Defense command and its expanded airspace security programs.
Capacity Building
While safety remains our first concern, we must also remain
committed to expanding capacity throughout the aviation system--in the
air and on the ground. While demand for passenger travel is down, it
will return. The FAA must be ready for this recovery. Now is the time
to focus on increasing airport capacity, while air traffic is
temporarily reduced. Both the President's Executive Order on
environmental streamlining and the $3.4 billion investment included in
the budget for the AIP program demonstrate the Administration's
commitment to expanding capacity. With this level of funding, coupled
with some structural changes in AIP formulas, the Administration will
be able to better target projects of national significance that provide
the greatest system benefit and, at the same time, provide additional
funding to airports that rely most on Federal assistance.
Even after September 11, FAA's Operational Evolution Plan (OEP)
remains fundamentally sound--with a planned 31 percent increase in
capacity by 2010. In response to the costly, frustrating, and
unacceptable delays that plagued the system in the summers of 1999 and
2000, FAA made needed changes, such as identifying and addressing choke
points in the system and developing and refining regular communications
between the airlines and the FAA Command Center to deal with daily
problems in the system.
The User Request Evaluation Tool (URET) gives controllers the
ability to approve more direct routes and is saving airlines time and
fuel. With this tool everyone wins. We're also seeing terrific results
from the Traffic Management Adviser (TMA), which makes more efficient
use of our busiest airports.
We believe that new runways added at the right airports are the
single most effective way to increase capacity. Thus, FAA's OEP tracks
12 runways scheduled for completion in the next 10 years. During
calendar years 2003 and 2004, Denver, Houston, Miami, and Orlando
airports are expected to complete runway projects.
The importance of investing in airport infrastructure cannot be
discussed only in terms of alleviating a congestion problem at a
specific location. These investments provide relief to the entire air
system. The economy relies on aviation to move people and products, and
aviation relies on an efficient NAS to accommodate the capacity demands
placed upon it. We must all work together--Congress, Federal, State and
local governments, and industry stakeholders--to ensure that the future
does not catch us unprepared for the return of air traffic to pre-
September 11 levels and higher. Future generations depend upon us.
A SAFER, SIMPLER, SMARTER AND MORE BUSINESS-LIKE FAA
In my tenure as Administrator, it has become apparent that FAA's
operational costs must be brought under control. Since any future
growth must be manageable, our decisions must be made in an informed
manner. Just as our safety decisions should be driven by data, so
should all our management decisions. Consequently, we must accelerate
our efforts to set up our new financial system, DELPHI, and complete
the implementation of our Cost Accounting System (CAS) and Labor
Distribution Reporting (LDR) initiative, and use these tools to drive
analysis toward better decisions.
We will improve our cost accounting and acquisition processes, and
we will become a performance-based organization. Currently, FAA has
implemented cost accounting in two lines of business and several
support organizations. And while we track 80 percent of our costs on a
monthly basis, we still have a lot of work to do.
As part of our cost accounting system, we are implementing a labor
distribution system in air traffic services called Cru-X, to account
for and distribute labor costs. Our air traffic controller workforce
will use this data to better assess their workload and performance.
Recently, the Inspector General noted that we have additional work to
do on internal controls related to this system. I am committed to
making this change, and to assuring the integrity of our cost
information. With budget shortfalls and depleting trust fund revenues,
we must be diligent stewards of the public's funds.
Though we have made great strides, there is still much to be done.
FAA received another unqualified or ``clean'' audit opinion on our
fiscal year 2002 Consolidated Financial Systems. I am proud to say that
this is the second year in a row that the Agency has received such an
opinion. This gives us the firm foundation that we need to implement
DELPHI effectively and to continue to build our cost accounting system.
The Agency has worked hard to implement a performance based pay
system. Approximately 36 percent of our employees are currently under
the system--a system that links organizational goals with individual
performance goals at every level. We must fully embrace a new way of
thinking: pay equals performance. I pledge to you my full commitment to
implementing such a system FAA-wide.
CONCLUSION
To ensure that FAA moves forward in all these areas, one of my top
priorities is to provide consistency and predictability in the way FAA
works with industry. I do not want any variations in FAA policy or
practice in the regions or field offices. I want our industry partners
in the United States and around the world to know what they can expect
and count on when dealing with the FAA. The future of aviation is
dependent upon all of us leveraging our reduced resources in support of
the common goal: a safe and efficient aviation system for our children
and generations to follow.
This year marks the centennial of the Wright Brothers' historic
flight at Kitty Hawk. When you look back on those early days of
aviation and compare how dangerous air travel was to its safety record
of today, it is easy to congratulate ourselves and feel content with
how far we've come. Yet, our pride should not give way to complacency.
We must continue to set and work to achieve goals on safety, capacity
and efficiency. Though we will face countless obstacles and difficult
decisions, we must draw upon the strength and courage of great aviation
pioneers, such as Lindbergh and Earhart, who set difficult goals and
attained them. I am proud to take part in the future of aviation, and I
stand ready to work with you, as together we enter the second century
of flight. Thank you.
This concludes my prepared statement. I am happy to answer your
questions at this time.
______
Biographical Sketch of Marion C. Blakey
Marion Clifton Blakey was sworn in September 13, 2002 as the 15th
Administrator of the Federal Aviation Administration. As Administrator,
Blakey is responsible for regulating and advancing the safety of the
Nation's airways as well as operating the world's largest air traffic
control system. Prior to being named FAA Administrator, Blakey served
as Chairman of the National Transportation Safety Board.
During her tenure as Chairman, Blakey managed a number of accident
investigations including the crash of American Airlines flight 587.
Blakey worked to improve the Board's accident reporting process and
increased industry and regulatory responsiveness to NTSB safety
recommendations. Additionally, Blakey strengthened the Board's advocacy
and outreach programs to promote safer travel throughout all modes of
transportation. She also furthered development of the NTSB Academy as a
national and international resource to enhance aviation safety and
accident investigations.
At the FAA, Ms. Blakey, continues a long career of public service.
In addition to NTSB Chairman, Blakey has held four previous
Presidential appointments, two of which required Senate confirmation.
From 1992 to 1993, Blakey served as Administrator of the Department of
Transportation's National Highway Traffic Safety Administration
(NHTSA). As the Nation's leading highway safety official, she was
charged with reducing deaths, injuries, and economic losses resulting
from motor vehicle crashes. Prior to her service at NHTSA, she held key
positions at the Department of Commerce, the Department of Education,
and the National Endowment for the Humanities, the White House, and the
Department of Transportation.
From 1993 to 2001, Blakey was the principal of Blakey & Associates,
a Washington, DC public affairs consulting firm with a particular focus
on transportation issues and traffic safety.
Ms. Blakey, born in Gadsden, Alabama, received her bachelor's
degree with honors in international studies from Mary Washington
College of the University of Virginia. She also attended Johns Hopkins
University, School of Advanced International Studies for graduate work
in Middle East Affairs.
Senator Shelby. Mr. Mead?
Office of the Inspector General
STATEMENT OF KENNETH M. MEAD, INSPECTOR GENERAL
Mr. Mead. Thank you, Mr. Chairman, Senator Murray, Senator
Dorgan, Senator Bennett.
It is good to be here with Administrator Blakey and Under
Secretary Shane, very good people and great to work with.
In your packages you have some slides. It has a blue wheel
on the front. I will refer to those a couple of times.
This hearing is occurring, of course, against the backdrop
of an industry in financial distress. As I was writing my
statement, I had to change it by the hour because it is hard to
know who is in bankruptcy and who is out. But as Senator Murray
was pointing out, they are either in or right on the brink of
bankruptcy, or just coming out of it.
I think it is important, though, for us all to recognize
that this is due to a confluence of factors that include an
unsustainable cost and fare structures that predate 9/11 by a
long time. That pattern persisted and became more pronounced
after 9/11 and now, with the war in Iraq, we are experiencing
an even greater precipitous decline in bookings, particularly
in the international area.
Of course, the airlines also point to increased security
related expenditures.
This first chart, I tried to map out on this first chart
the yellow and blue, what has happened with respect to business
travel both before and after 9/11. You can see the steep drop
in September, 2001.
But look to the left of that axis and you will note that
business travel was down 20 percent just before 9/11. And in
November 2002 compared to November 2000, leisure travel was
down 19 percent and business was down 32 percent. What we are
seeing, to some degree, is a continuation of some problems that
existed before 9/11.
Even before the war with Iraq, major carriers were
projecting losses of about $6 or 7 billion for 2003. With the
war, and their assumption is a 90-day war, major carrier
projections are about $10 to $11 billion. And the end is not in
sight. We do not think you are going to see a recovery to the
2000 levels until 2005, 2006, which is consistent with FAA's
aviation forecast.
Here are some other interesting metrics. In February 2003
actual flight operations were down 10 percent compared to
February 2000. And an interesting dimension to that is there
has been a huge increase in the use of regional jets, a 156
percent increase compared to a 17 percent decline in larger
aircraft and a 46 percent decline in the use of turboprop
aircraft.
Domestic emplanements are down nearly 8 percent in 2003
compared to January 2000. Much of the reduced demand represents
what had been the highest fare business travelers. An
interesting statistic here relates to the network carrier cost
structure. About 10 to 20 percent of their passengers, the
business travelers, were providing between 40 and 50 percent of
the revenues. So when the business travel part of the market
began to fall out, you can see why the airlines were hurting so
much.
Another interesting statistic, last year break-even load
factors, that is the average percentage of paying passengers on
all flights that are needed to cover an airline's costs. For
the industry as a whole it was 87 percent. In other words, 87
percent of that plane had to be full before an airline would
start talking about turning a profit.
Actual load factors, though, were only averaging about 74
percent. One airline had a break-even load factor of over 100
percent. And you might say well, how can an airline fill more
than 100 percent of its seats? The answer is it cannot. And
that is why that airline is teetering on the edge of
bankruptcy.
I know you are considering some relief packages and you and
your staffs must be exhausted from the last few days. I would
say that great care has got to be taken in framing a relief
package. I think a relief package is warranted. But take care
to not provide a cash subsidy that is going to simply allow the
airlines to avoid making hard calls that many of them are
already in the process of making. We do not want it to be a
bailout.
And I might add, I think it has been pretty unseemly for
airlines to come up here to Congress and ask for financial aid
from the taxpayers for not the first, but the second time when
the senior executives are getting very large bonuses. I think
the American taxpayer would wonder what is wrong with this
picture.
The second factor is that you require any airline security
costs that Congress judges are eligible be documented. And that
the airlines have some evidence of that $4 billion that they
are claiming is justifiable. I do not think we want a repeat of
what happened last year when Congress thought it was going to
be $1 billion and it eventually ended up being about $300
million.
Third. That it be a limited duration. This is an important
issue, a limited duration package will allow you to come back
to revisit it if it is necessary.
And finally, I am not sure that the packages consider how
we are going to treat the foreign carriers that come here and
pay these fees. We want to make sure that we do not develop an
equity argument whereof they pay a fee and we reimburse
domestic carriers. I would expect that there would be some
expectation that they be reimbursed as well.
I would like to move to a word on small communities. You
hear a lot of anecdotal evidence that service to small
communities is declining. It is not just anecdotal. I have a
chart, chart 2 cuts up the United States into quadrants. And
you can see that on the average you have lost about 19 percent
of service to your small, medium non-hub communities. The
Northeast is particularly hard hit--about 33 percent of their
service has been lost. I know an important matter on your
agenda is the essential air service program.
I now would like to turn to FAA. I think it is very
important to recognize that this agency oversees the largest
and safest air transportation system in the world. FAA deserves
a lot of credit for that. I think Ms. Blakey's safety
background is going to serve the Nation extremely well in that
regard.
But this agency urgently needs to get its costs under
control. Why? Well, projected tax receipts to the Aviation
Trust Fund for 2004 have dropped from approximately $12.5
billion to around $10 billion. Over the next 4 years the
projected trust fund tax revenues are down and you are going to
have about $10 billion less than you were counting on.
While these projections have dropped precipitously, FAA's
spending has not. Budgets increased from about $8 billion in
1996 to $14 billion in 2004. That is about 70 percent. Over
half of that, though, is for increased operations cost, which
are mostly payroll costs.
The committee should know that personnel reform was a key
element of the move to make FAA performance-based. But to date,
the reality has been increasing workforce costs and
significantly higher salaries.
The new compensation system for controllers, FAA's largest
workforce, was a big cost driver. They have a very good pay
package. The average base salary for fully certified
controllers, exclusive of overtime, is now about $106,000. In
1998 it was about $72,000. That is a 47 or 48 percent increase.
Even though FAA is supposed to be a performance-based
organization, only 36 percent of the employees actually get
paid based on individual performance. The rest is largely
automatic.
In terms of acquisitions, for air traffic control, five
major acquisitions out of 20 that we tracked have experienced
cost growth of over $3 billion and that cost growth alone is
equivalent to 100 percent of a full year's appropriation for
acquisitions. I do not think continued cost growth of that
magnitude is sustainable, especially given the decline in
revenues.
In some ways, it is the same picture the airlines were
facing. I think FAA, under Ms. Blakey's leadership, needs to
redouble its efforts to be a performance-based organization.
On the safety front, there are a couple of areas I would
like to mention. One is FAA has had some progress in reducing
operational errors and runway incursions, but they are still
much too high. They are experiencing one involving a commercial
airliner every 10 days. That means that once every 10 days a
commercial airliner is coming very close to just barely
avoiding a collision, either on the ground or in the air. And
so more progress is needed there.
Close attention also is needed with respect to the level of
oversight being provided to repair stations. Some metrics, in
1996, 36 percent of airline maintenance costs went to repair
stations. Now it is 47 percent, and you can expect it to grow.
For some airlines, 64 to 77 percent of their maintenance is
being outsourced. So we should expect a corresponding shift in
the FAA's vigilance and attention to that area.
And finally, a pending wave of controller retirements.
There is some debate about how many controllers will retire and
when. And that is one reason we need this Cru-X cost accounting
system or labor distribution system so we can find out where
the controllers are that are going to retire and how to plan
accordingly.
But the number that some are using is that by 2010 you
could lose about 7,000 controllers. This is about half the
controller workforce. It takes about 5 years right now to train
a controller to full proficiency.
PREPARED STATEMENT
And finally, a security related matter on the airports that
I would encourage the Congress to resolve. Nobody knows who
will pay for the installation of these SUV-sized explosive
detection machines at airports. The airports, I am sure, have
visited you. And when they say this is of concern to them, they
have a legitimate point. This is not an inconsequential cost
item, Mr. Chairman. We peg it at about $3 to $4 billion. So
some resolution is needed on that point.
That concludes my statement, sir.
[The statement follows:]
Prepared Statement of Kenneth M. Mead
Mr. Chairman and Members of the Subcommittee, we appreciate the
opportunity to testify today as the Subcommittee begins deliberations
on the fiscal year 2004 appropriation for the Federal Aviation
Administration (FAA).
This hearing is occurring against the backdrop of an industry in
financial distress--two airlines representing more than 20 percent of
the industry are in bankruptcy, and several others are teetering on the
brink. This is due to a confluence of factors that include
unsustainable cost and fare structures that clearly predate 9/11 and,
with the advent of the war in Iraq, precipitous declines in travel
bookings. The airlines also point to increased security-related
expenditures for passenger screening, insurance, and Federal security
taxes as contributing factors to their financial condition.
Great care must be taken to ensure that any relief package provided
by Congress (1) does not provide a cash subsidy that allows a way for
airlines to avoid making the hard calls necessary to become
sustainable, including lowering labor costs (including management
salaries and bonuses) and increasing productivity of capital; (2)
require that any airline security-related costs that Congress judges
are eligible for reimbursement be supported by documentary evidence
that clearly demonstrates that claimed costs were actually incurred;
and (3) be of limited duration.
The issue of service to small- and medium-sized communities is
related to the financial condition of the airline industry. In an
effort to stem losses, airlines have reduced service in the smallest
communities by 19 percent in the past 5 years. Funding levels for the
Essential Air Service Program (EAS), which is one vehicle for restoring
access to air service in small communities, will be an important issue
for the Committee's consideration this year. It should be noted,
however, that maintenance of service in small communities will be most
successful where restructuring of the cost structures of the network
carriers is most successful.
As for FAA, it is important to recognize that the agency oversees
the largest and safest air transport system in the world, but FAA
urgently needs to do considerably more to bring its costs under
control. FAA's budget has increased from $8.2 billion in 1996 to $14
billion in fiscal year 2004--an increase of $5.8 billion, or over 70
percent. Over half of this increase is attributable to sharply rising
costs in FAA's operations, which are made up primarily of salaries
(about 74 percent of FAA's fiscal year 2004 Operations budget). From
1998 (when FAA began implementing new pay systems), salaries within the
agency have increased 41 percent whereas the overall increase for the
Federal workforce in Washington, DC, for example, was about 30 percent.
In terms of acquisitions, 5 major acquisitions out of 20 that we
track have experienced substantial cost growth totaling more than $3
billion, which is equivalent to an entire year's budget for FAA's
modernization account. These same 5 acquisitions have also experienced
schedule slips of 3 to 5 years.
Continued cost growth of this magnitude is unsustainable given the
financial state of the airline industry, multi-billion dollar declines
in projected Aviation Trust Fund receipts, and greater dependence on
the General Fund to pay for FAA's operations. We do not believe the
answer to cost growth at FAA lies in an increase in taxes, fees, or
other charges, which are already significant. Given the weak demand
environment, any further increases are likely to reduce airline
revenues and further threaten the financial health of the industry.
Just as the airlines have had to rethink the basics of their business,
FAA also must re-examine how it does business and redouble its efforts
to become performance based in deed as well as in word. Administrator
Blakey is taking steps to move the agency in that direction.
In terms of safety, we feel the imperatives for FAA are: (1)
further reducing operational errors (when planes come too close
together in the air) and runway incursions (potential collisions on the
ground)--in 2002, a commercial aircraft was involved in at least one
serious runway incursion or operational error every 10 days; (2)
providing adequate oversight of air carrier maintenance in view of
shifts in carrier practices from in-house to outsourced (from 1996 to
2001, outsourcing maintenance by major air carriers increased from 37
percent of total maintenance costs to 47 percent); and (3) addressing
pending controller retirements.
On the security front, an important issue will be resolving who
will pay for the next phase of explosives detection systems integration
into airport baggage systems. This is a multi-billion dollar item.
STATE OF THE AIRLINE INDUSTRY
Most of the major domestic airlines are in a precarious financial
condition. Several airlines are in bankruptcy and others are teetering
on the brink. \1\ As a group, the major carriers reported net losses
totaling over $11 billion in 2002, which followed a year where their
combined losses totaled $7.5 billion. For 2003, even before the United
States went to war with Iraq, major carriers were projecting losses of
between $6 billion and $7 billion. Now that the United States is at
war, the airlines have increased their estimated losses to between $10
billion and $11 billion, based on a 90-day war. And the end is not yet
in sight, as current forecasts now extend the timeframe for recovery
from 2004 to 2005 or 2006.
---------------------------------------------------------------------------
\1\ As of April 1, 2003, the two carriers in bankruptcy were United
Airlines and Hawaiian Airlines. USAirways emerged from bankruptcy
protection on March 31, 2003.
---------------------------------------------------------------------------
In February 2003, actual flight operations were down 10 percent
compared to February 2000. Overall, domestic enplanements were down
nearly 8 percent in January 2003 compared to January 2000. Much of the
reduced demand represents what had once been the higher fare business
travelers. By some estimates, business travelers account for 50 percent
of airline revenues although they typically represent only 20 percent
of airline travel. As the following figure illustrates, business travel
in November 2002 was nearly one-third less than it was in November
2000.
In the third quarter 2002, breakeven load factors \2\ for the
industry as a whole were 87 percent, while actual load factors averaged
only 74 percent. One airline in that period experienced breakeven load
factors of over 100 percent. How can an airline fill more than 100
percent of its seats? The answer is it cannot, which is why that
carrier is on the brink of bankruptcy.
---------------------------------------------------------------------------
\2\ The average percentage of paying passengers on all flights
needed to cover airline costs.
---------------------------------------------------------------------------
In response to the economic downturn and increased costs following
9/11, airlines have reduced their workforces, modified schedules,
eliminated flights, closed offices and facilities, and retired
aircraft. Negotiations are underway to reduce employment expenses
throughout the industry by an additional $10 billion. Several airlines
have used the bankruptcy process to restructure their costs, including
renegotiating their labor contracts and their debt instruments. Still,
financial conditions continue to be weak, exacerbated now by the
ongoing war in Iraq.
Based on a scenario of a 90-day war, the airlines project that
their losses will be $4 billion higher in 2003 than the $6.7 billion
they had originally projected. The losses would be driven by decreased
passenger demand, higher fuel prices, and lower airfares. The airlines
attest that they have already incurred over $4 billion in additional
security costs since 9/11, including passenger screening fees, new
security taxes, increased insurance costs, freight restrictions,
cockpit door fortification, and the Federal Air Marshall program.
A case could be made for providing some form of financial relief to
assist airlines in the short term; such as extending the Federal war
risk insurance program and extending the Air Transportation
Stabilization Board loan guarantee program. Loan guarantees, if
prudently incurred, can help to stabilize the financial condition of
the industry. They may also prove a prudent, short-term market
intervention if used to finance a realistically restructured airline's
exit from bankruptcy.
Other forms of potential relief, including reimbursing the airlines
for security improvements, eliminating or reducing the Passenger
Security Tax and Air Carrier Security Fee, and drawing down the
Strategic Petroleum Reserve, should be considered in the following
context.
The airlines are requesting a very large sum of money from the
American taxpayers. In that regard, we are concerned, as are American
taxpayers, about the appearance of large executive pay packages that
are still in place for top executives at some of the airlines with
large operating losses. Financial aid is not a substitute for self-
help. This must come in the form of restructuring labor costs and
management salaries, as well as increasing productivity of capital.
Policy decisions are being made that could affect the competitive
balance of the airline industry, and the implications of providing
financial assistance for any reason need to be carefully considered.
The airline industry is important to the economy of the United States
and certainly financial assistance at this juncture would help preserve
the industry in the short term. But it should be noted that while all
airlines have had to incur the increased financial burden of operating
in a post 9/11 environment, not all airlines are suffering equally. In
fact, two airlines. Southwest and JetBlue, earned profits last year.
These airlines were successful because their cost structures represent
a more realistic picture of a post-deregulation competitive airline
industry. Care should be taken not to penalize carriers who have
adapted or revised their cost structures to forms that are sustainable,
even during an economic crisis.
Consideration should also be given to how financial assistance to
the airline industry will be viewed by our international counterparts.
To the extent possible, any relief package should be structured to
limit the possibility of being criticized as an unfair airline subsidy.
The airlines are especially vulnerable to the effects of this war
and the terrorist attacks that may accompany it. But it should not be
forgotten that during wartime, many industries suffer financial losses-
travel agents, retail outlets, cruise lines, and hotels--to name a few.
Therefore, it is essential that a financial aid package designed to
assist just one affected industry--the airlines--include narrowly
defined relief terms and be of limited duration.
If the decision is made to provide some sort of assistance to the
airlines, the following guidelines should apply.
--The effects of 9/11 and the war in Iraq have no doubt affected the
airlines' costs and revenues, but the fact is that many
airlines had unsustainable cost structures long before these
events took place. Any financial assistance that is forthcoming
should not result in a bail-out for failures in the competitive
marketplace that occurred prior to 9/11. Funding that is not
tied specifically and demonstrably to direct security-related
costs simply postpones the restructuring that will be necessary
in order for the major network carriers to remain viable. Most
of the current financial woes of the industry should be solved
by the marketplace.
--Documentation of which costs are being claimed and in what amount
must be provided by the airlines and verified to ensure that
funds provided under a security relief package are not
subsidizing financial losses unrelated to security. Clarity is
needed concerning whether financial assistance will be
restricted to future war-related costs or security-related
costs already incurred by the industry. Whichever costs are
deemed eligible, the airlines must be held absolutely
accountable for documenting the costs the aid is applied
towards.
--Financial assistance aimed at providing short-term war relief
should be just that: short term. Aid, if provided, should be of
limited duration and should not come to be expected by the
industry on a recurring basis. Given the uncertainty of what
could happen over the course of the coming year, an aid program
should terminate at the end of a firmly fixed time period with
the option to revisit the terms of the program if conditions
warrant.
SERVICE TO SMALL AND MEDIUM SIZED COMMUNITIES
Financial problems for major airlines may ultimately affect the air
service to small- and medium-sized communities. The major network
carriers serve these communities through their mainline service and
regional affiliates by connecting passengers from these communities to
the major airlines' hubs. At the current time, low-cost carriers are
not a solution for many small- and medium-sized communities if their
service declines. The low-cost carrier business models focus on serving
dense markets that make it economical to fly multiple frequencies in
large-volume jets. That model would not be sustainable in these small-
or medium-sized communities. Maintenance of service in these markets
will be most successful where the restructuring of the network carriers
is most successful.
In the smallest communities--those served by non-hub airports--
service has been declining for the past 5 years. Between March 1998 and
March 2003, non-hub airports nationwide lost 19 percent of their
commercial air service as measured by available seat miles. Between
March 2000 and March 2003, non-hub airports in the Northeast and
Midwest lost approximately one-third of their service.
The Essential Air Service Program is a tool that these small
communities rely on for attracting air service to their communities.
The funding levels for this program will be an important matter for the
Committee's consideration this year.
GENERAL STATE OF FAA
As a result of the slow economy and the decline in air travel,
there has been a significant decrease in tax revenues coming into the
Aviation Trust Fund. Projected tax receipts to the Aviation Trust Fund
for fiscal year 2004 have dropped from approximately $12.6 billion
estimated in April 2001 to about $10.2 billion estimated in February
2003. Over the next 4 years, Aviation Trust Fund tax revenues are
expected to be about $10 billion less than projections made in April
2001. Although Trust Fund projections are down for next year, FAA's
spending request is not; increasing from $13.6 billion this year to
$14.0 billion next year. If this $3.8 billion gap between Trust Fund
revenues and FAA's budget ($10.2 billion to $14.0 billion) is financed
by the General Fund, it would represent a rough doubling of such
spending compared to recent years.
While there have been suggestions that this gap could be closed by
increasing taxes or fees on airlines and air passengers, we urge
extreme caution in this area. Taxes and fees are already high. For
example, a non-stop round-trip ticket costing $200 may consist of
nearly $33 in taxes, fees, and airport passenger facility charges or 16
percent of the fare. On a connecting flight, the taxes on a $200 ticket
could be up to $51, or nearly 26 percent of the fare. Any further
increases are likely to reduce airline revenues, given the weak demand
environment and will further threaten the financial health of the
industry.
Over the past 5 years, FAA has had some notable accomplishments--
successfully managing the Y2K computer problem, obtaining a clean
opinion on agency-wide financial statements, bringing new Free Flight
controller tools on-line, deploying the Display System Replacement on
time and within budget, and expeditiously shutting the system down
safely on 9/11. However, a key focus for FAA now must be effective cost
control. This, in our opinion, is a primary challenge facing FAA for
the next several years.
Operating as a Performance Based Organization.--In 1996, Congress
acted to make FAA a performance-based organization by giving the agency
two powerful tools-personnel reform and acquisition reform. The
expectation was that FAA would operate more like a business--that is,
services would be provided to users cost effectively and major
acquisitions would be delivered on time and within budget. FAA was also
directed to establish a cost accounting system so that FAA and others
would know where funds were being spent and on what. It is now over 6
years later and we do not see sufficient progress toward FAA's becoming
performance-based or toward achieving the outcomes that Congress
envisioned.
--Personnel Reform.--Personnel reform was a key element of the move
to make FAA performance-based. But to date, the reality has
been increasing workforce costs and significantly higher
salaries. From 1998 (when FAA began implementing new pay
systems), salaries within the agency have increased 41 percent
whereas the overall increase for the Federal workforce in
Washington, D.C., for example, was about 30 percent.
The new pay system for controllers (FAA's largest workforce)
was a significant cost driver. The average base salary for
fully certified controllers is now over $106,000, which is
exclusive of premium pay and overtime. That figure represents a
47 percent increase over the 1998 average of $72,000, and
compares to an average salary increase of about 32 percent for
all other FAA employees during the same period. Although
linking pay and performance was a key tenet of personnel
reform, only about 36 percent of FAA employees receive pay
increases based on individual performance. The remaining FAA
employees receive largely automatic pay increases.
In our work, we also found there are between 1,000 and 1,500
side bar agreements or Memorandums of Understanding (MOUs) that
are outside the national collective bargaining agreement with
controllers. Many serve very legitimate purposes, but some can
add millions to personnel costs. For example, one MOU we
reviewed allows controllers transferring to larger consolidated
facilities to begin earning the higher salaries associated with
their new positions substantially in advance of their transfer
or taking on new duties. At one location, controllers received
their full salary increases 1 year in advance of their transfer
(in some cases going from an annual salary of around $54,000 to
over $99,000). During that time, they remained in their old
location, controlling the same air space, and performing the
same duties.
We found that controls over MOUs are inadequate. FAA
management does not know the exact number or nature of these
agreements, there are no established procedures for approving
MOUs, and their cost impact on the budget has not been
analyzed. It is important for FAA to get a handle on this
process because many MOUs involve issues pertaining to
deploying new equipment. We briefed Administrator Blakey on our
concerns regarding MOUs; FAA is now in the process of
identifying those MOUs that are problematic or costly and has
begun a dialogue with the controller's union to address them.
--Acquisition Reform.--FAA has learned from past mistakes and its
``build a little, test a little'' approach has clearly avoided
failures on the scale of the multi-billion dollar Advanced
Automation System acquisition. But the bottom line is that
significant schedule slips and substantial cost growth for
major air traffic control acquisitions are all too common. The
following chart provides cost and schedule information on 5 of
20 projects we track that were largely managed since FAA was
granted acquisition reform.
----------------------------------------------------------------------------------------------------------------
Estimated program Implementation schedule
costs (dollars in Percent ------------------------------------
Program millions) cost
------------------------ growth Original Current
Original Current
----------------------------------------------------------------------------------------------------------------
Wide Area Augmentation System............ $892.4 \1\ $2,922 227 1998-2001 2003-\2\ \3\
.4
Standard Terminal Automation Replacement 940.2 \2\ 1,690. 80 1998-2005 2002-\2\ \3\
System. 2
Airport Surveillance Radar-11............ 752.9 916.2 22 2000-2005 2003-2008
Weather and Radar Processor.............. 126.4 152.7 21 1999-2000 2002-2003
Operational and Supportability 174.7 251.0 44 1998-2001 2002-2005
Implementation System.
----------------------------------------------------------------------------------------------------------------
\1\ This includes the cost to acquire geostationary satellites and costs are under review.
\2\ Costs and schedules are under review by FAA.
\3\ To be determined.
These five acquisitions have experienced substantial cost
growth totaling more than $3 billion, which is equivalent to an
entire year's budget for FAA's modernization account
(Facilities and Equipment). These same five acquisitions have
also experienced schedule slips of 3 to 5 years. Problems with
cost growth, schedule slips, and performance shortfalls have
serious consequences. They result in costly interim systems, a
reduction in units procured, postponed benefits (in terms of
safety and efficiency), or ``crowding out'' other projects. For
example, in fiscal year 2002 alone, FAA reprogrammed over $40
million from other modernization efforts to pay for cost
increases in the Standard Terminal Automation Replacement
System (new controller displays for FAA's terminal facilities).
FAA needs to set priorities and link the Operational
Evolution Plan (OEP) (FAA's blue-print for enhancing capacity),
with the agency's budget and address uncertainties with how
quickly airspace users will equip with new technologies in the
Plan (estimated at $11 billion). FAA is retooling the OEP, and
both FAA and industry officials told us that considerable
benefits may be obtained through airspace changes, new
procedures, and taking advantage of systems currently onboard
aircraft--all of which do not require major investments by
airlines. According to senior FAA officials, hard decisions
about funding OEP initiatives and related major acquisitions
will need to be made. In addition, FAA needs to develop metrics
to assess progress with major acquisitions.
--Cost Accounting System.--To effectively operate as a performance-
based organization, FAA needs an accurate cost accounting
system to track agency costs and provide managers with needed
cost data by location. Without a reliable cost accounting
system, FAA cannot credibly claim to be, nor can it function
as, a performance-based organization.
At the direction of Congress, FAA began developing its cost
accounting system in 1996, which was estimated at that time to
cost about $12 million and be completed in October 1998. Now,
after nearly 7 years of development and over $38 million, FAA
still does not have an adequate cost accounting system, and it
expects to spend at least another $7 million to deploy the cost
accounting system throughout FAA. Although FAA's cost
accounting system is producing cost data for two of its lines
of business, it still does not report costs for each facility
location. For example, for the Terminal Service in fiscal year
2001, about $1.3 billion of $2.4 billion was reported in lump-
sum totals and not by individual facility locations.
FAA also needs an accurate labor distribution system to track
the costs and productivity of its workforces. Cru-X is the
labor distribution system FAA chose to track hours worked by
air traffic employees. As designed, Cru-X could have provided
credible workforce data for addressing controller concerns
about staffing shortages, related overtime expenditures, and to
help determine how many controllers are needed and where. That
information in turn is especially important given projections
of pending controller retirements. Unfortunately, Cru-X has not
been implemented as designed. We hope it will be in the coming
year.
Aviation Safety.--After several years of continuous increases in
operational errors and runway incursions, FAA has made progress in
reducing these incidents. In fiscal year 2002, operational errors
decreased 11 percent to 1,061 and runway incursions decreased 17
percent to 339 from fiscal year 2001 levels. Despite FAA's progress,
the number of these incidents is still too high considering the
potential catastrophic results of a midair collision or a runway
accident. On average, in fiscal year 2002, at least one commercial
aircraft was involved in a serious runway incursion or operational
error (in which a collision was barely avoided) every 10 days. We will
be issuing our report on operational error and runway incursions
shortly.
FAA also needs to pay close attention to the level of oversight it
provides for repair stations. Since 1996, there has been a significant
increase in air carriers' use of these facilities. In 1996, major air
carriers spent $1.6 billion for outsourced maintenance (37 percent of
total maintenance costs), whereas in 2001, the major air carriers
outsourced $2.9 billion (47 percent of total maintenance costs). As of
September 2002, four major carriers were outsourcing between 64 and 77
percent of their maintenance.
In spite of this increase in the use of repair stations, FAA's
surveillance continues to target more resources on air carriers' in-
house maintenance facilities than repair stations. In fact, repair
stations are required to be inspected by FAA only once annually. In
addition, some FAA-certified foreign repair stations are not inspected
by FAA inspectors at all because foreign civil aviation authorities
review repair stations on FAA's behalf.
This trend in outsourcing maintenance is likely to continue, and
FAA needs to consider the shift in maintenance practices when planning
its safety surveillance work. We will be issuing our report on FAA's
oversight of repair stations shortly.
Another significant issue is the pending wave of controller
retirements. In May 2001, FAA estimated almost 7,200 controllers could
leave the agency by the end of fiscal year 2010. In general, the
training process to become a certified professional controller can take
up to 5 years. Given that time lag, FAA needs to take actions now to
address when and where new controllers will be needed. The pending
retirements underscore the need for an accurate labor distribution
system. We will be starting an audit of controller training in the next
several weeks.
Mr. Chairman, let me conclude by discussing a major issue for
airports--funding the next phase of explosives detection systems (EDS)
integration. Thus far, nearly all EDS equipment has been lobby-
installed. The planned next step (integrating the EDS equipment into
airport baggage systems) is by far the most costly aspect of full
implementation. We have seen estimates that put the costs of those
efforts between $3 and $5 billion. A key question is who will pay for
those costs as well as other costs still to be determined, such as
improving access controls and acquiring new screening technologies.
MAKING FAA A PERFORMANCE-BASED ORGANIZATION THROUGH CONTROLLING COSTS
IN OPERATIONS AND MAJOR ACQUISITIONS
Controlling Operating Cost Increases.--Although Congress envisioned
that personnel reform would result in more cost-effective operations,
this has not occurred. Since 1996, FAA's operating costs have increased
substantially. As shown in the following graph, FAA's operations budget
has increased from $4.6 billion in fiscal year 1996 to $7.6 billion in
fiscal year 2004. Given the decline in Aviation Trust Fund revenues and
the financial situation of the airlines, a continuation of this growth
can no longer be sustained.
Much of the increase in operations costs has been a result of
salary increases from collective bargaining agreements negotiated under
FAA's personnel reform authority. The 1998 collective bargaining
agreement with the National Air Traffic Controllers Association
(NATCA), which created a new pay system for controllers, was a
significant cost driver. Under the agreement, most controllers'
salaries increased substantially. For example,
--The average base salary for fully certified controllers has now
risen to over $106,000--a 47 percent increase over the 1998
average of about $72,000 (as shown in the table below). This
compares to an average salary increase for all other FAA
employees during the same period of about 32 percent, and for
all Government employees in the Washington, D.C. area of about
30 percent.
AVERAGE BASE SALARIES FOR FAA EMPLOYEES
------------------------------------------------------------------------
Fully
certified air Non-controller
Average base salary (including locality) traffic FAA employees
controllers
------------------------------------------------------------------------
2003.................................... \1\ $106,580 $78,080
1998.................................... $72,580 $59,200
Percentage Increase From 1998 to 2003... 46.8 31.9
------------------------------------------------------------------------
\1\ After 4.9 percent increase.
Following the NATCA agreement, other FAA workforces began
organizing into collective bargaining units as well. Today, FAA has 48
collective bargaining units as compared to 19 collective bargaining
units in 1996.
The increase in bargaining units has complicated FAA's plans for
fielding its agency-wide compensation system (created in April 2000),
because FAA's 1996 reauthorization requires that FAA negotiate
compensation with each of its unions. This has also complicated FAA's
plans to create a link between pay and performance. Although linking
pay and performance was a key tenet of personnel reform, only about 36
percent of FAA employees receive pay increases based on individual
performance. The remaining FAA employees receive largely automatic pay
increases.
We also found, that outside the national collective bargaining
agreement with NATCA, FAA and the union have entered into hundreds of
side bar agreements or MOUs. These agreements can cover a wide range of
issues such as implementing new technology, changes in working
conditions and, as a result of personnel reform bonuses and awards, all
of which are in addition to base pay. We found that FAA's controls over
MOUs are inadequate. For example, there is:
--no standard guidance for negotiating, implementing, or signing
MOUs;
--broad authority among managers to negotiate MOUs and commit the
agency;
--no requirement for including labor relations specialists in
negotiations; and
--no requirement for estimating potential cost impacts prior to
signing the agreement.
In addition, FAA has no system for tracking MOUs, but estimates
there may be between 1,000 and 1,500 MOUs agency-wide. While most MOUs
serve very legitimate purposes, we reviewed a number of MOUs that had
substantial cost implications. For example,
--As part of the controller pay system, FAA and NATCA entered into a
national MOU providing controllers with an additional cost of
living adjustment. As a result, at 111 locations, controllers
receive between 1 and 10 percent in ``Controller Incentive
Pay,'' which is in addition to Government-wide locality pay. In
fiscal year 2002, the total cost for this additional pay was
about $27 million.
--One MOU we reviewed allows controllers transferring to larger
consolidated facilities to begin earning the higher salaries
associated with their new positions substantially in advance of
their transfer or taking on new duties. At one location,
controllers received their full salary increases 1 year in
advance of their transfer (in some cases going from an annual
salary of around $54,000 to over $99,000). During that time,
they remained in their old location, controlling the same air
space, and performing the same duties.
Administrator Blakey is aware of our concerns regarding MOUs and
has begun a dialogue with NATCA to address this issue.
Improving Management of Major Acquisitions.--FAA spends almost $3
billion annually on a wide range of new radars, satellite-based
navigation systems, and communication networks. Historically, FAA's
modernization initiatives have experienced cost increases, schedule
slips, and shortfalls in performance. While progress has been made with
Free Flight Phase 1, problems persist with other major acquisitions. In
1996, Congress exempted FAA from Federal procurement rules that the
agency said hindered its ability to modernize the air traffic control
system. Now, after nearly 7 years, FAA has made progress in reducing
the time it takes to award contracts, but acquisition reform has had
little measurable impact on bottom line results--bringing large-scale
projects in on time and within budget. The following chart provides
cost and schedule information on 5 of 20 projects we track that have
been managed since FAA was granted acquisition reform.
----------------------------------------------------------------------------------------------------------------
Estimated program Implementation schedule
costs (dollars in Percent ------------------------------------
Program millions) cost
------------------------ growth Original Current
Original Current
----------------------------------------------------------------------------------------------------------------
WAAS..................................... $892.4 \1\ $2,92 227 1998-2001 2003-\2\ \3\
2.4
STARS.................................... 940.2 \2\ 1,690. 80 1998-2005 2002-\2\ \3\
2
ASR-11................................... 752.9 916.2 22 2000-2005 2003-2008
WARP..................................... 126.4 152.7 21 1999-2000 2002-2003
OASIS.................................... 174.7 251.0 44 1998-2001 2002-2005
----------------------------------------------------------------------------------------------------------------
\1\ This includes the cost to acquire geostationary satellites and costs are under review.
\2\ Costs and schedules are under review.
\3\ To be determined.
These five acquisitions have experienced cost growth of over $3
billion and schedule slips of 3 to 5 years. Problems with cost growth,
schedule slips, and performance shortfalls have serious consequences--
they result in costly interim systems, a reduction in units procured,
postponed benefits (in terms of safety and efficiency), or ``crowding
out'' other projects.
For example, STARS, which commenced operations at Philadelphia this
past year, has cost FAA more than $1 billion since 1996. Most of these
funds were spent on developing STARS, not delivering systems. When the
STARS development schedule began slipping, FAA procured an interim
system, the Common Automated Radar Terminal System (Common ARTS) for
about $200 million. FAA is now operating Common ARTS (software and
processors) at approximately 140 locations.
Moreover, in fiscal year 2002 alone, FAA reprogrammed over $40
million from other modernization efforts (data link communications,
oceanic modernization, and instrument landing systems) to pay for cost
increases with STARS. As a result of these cost and schedule problems,
in March 2002, FAA officials proposed scaling back the program from 182
systems for $1.69 billion to a revised estimate of 73 systems for $1.33
billion. No final decision has been made, and FAA is currently
reevaluating how many STARS systems it can afford.
Cost growth of this magnitude must be avoided because only 60
percent of FAA's fiscal year 2004 request for Facilities and Equipment
is expected to be spent on new air traffic control systems, whereas the
remaining funds are requested for FAA facilities, mission support
(i.e., support contracts), and personnel expenses.
There are large-scale acquisitions--both old and new--whose cost or
schedule baselines need to be revised because the programs have changed
considerably or benefits have shifted. For example, the Integrated
Terminal Weather System (ITWS) provides air traffic managers with
enhanced weather information. FAA planned to complete deployment of the
new weather system in 2004 at a cost of $286 million. However, unit
production costs have skyrocketed from $360,000 to over $1 million; FAA
cannot execute the program as scheduled and may extend the deployment
by 4 years.
In addition, FAA intended to have the Local Area Augmentation
System (Category I)--a new precision approach and landing system--in
operation in 2004. It is now clear that this milestone cannot be met
because of additional development work, evolving requirements, and
unresolved issues regarding how the system will be certified as safe
for pilots to use. Moreover, the more demanding Category II/III
services (planned for 2005) are now a research and development effort
with an uncertain end state. This means that benefits associated with
the new precision approach and landing system will be postponed.
Our work has also found that FAA has not followed sound business
practices for administering contracts. We have consistently found a
lack of basic contract administration at every stage of contract
management from contract award to contract closeout.
For example, we found that Government cost estimates were:
--prepared by FAA engineers, then ignored;
--prepared using unreliable resource and cost data;
--prepared by the contractor (a direct conflict of interest); or
--not prepared at all.
FAA has stated that it will take actions to address these
concerns--the key now is follow through.
In addition to strengthening contract oversight, FAA needs to
develop metrics to assess progress with major acquisitions, make
greater use of Defense Contract Audit Agency audits, and institute cost
control mechanisms for software-intensive contracts. FAA needs to
obtain these audits from the Defense Contract Audit Agency for contract
costs billed by private companies for research and development,
production, and all costs related to system development. FAA should get
these audits to ensure that the amounts billed are reasonable and that
the government's interest is properly protected. By ensuring that only
acceptable costs are paid to contractors, FAA will be able to stretch
its procurement dollars further.
With schedule slips and cost overruns in major acquisitions, it
should be noted that FAA is not getting as much for its $3 billion
annual investment as it originally expected.
Tracking Costs.--An effective cost accounting system is fundamental
to measuring the cost of FAA activities and provides the basis for
setting benchmarks and measuring performance. Without a reliable cost
accounting system, FAA cannot credibly claim to be, nor function as, a
performance-based organization. It represents the underpinning for
FAA's operation as a performance-based organization through the
development of good cost information for effective decision-making. At
the direction of Congress, FAA began developing its cost accounting
system in 1996, which was estimated at that time to cost about $12
million and be completed in October 1998. Now, after nearly 7 years of
development and spending over $38 million, FAA still does not have an
adequate cost accounting system, and expects to spend at least another
$7 million to deploy the cost accounting system throughout FAA.
Although FAA's cost accounting system is producing cost data for
two of its lines of business, it still does not report costs for each
facility location. For example, for the Terminal Service in fiscal year
2001, about $1.3 billion of $2.4 billion was reported in lump-sum
totals and not by individual facility locations.
FAA also needs an accurate labor distribution system to track the
costs and productivity of its workforces. Cru-X is the labor
distribution system FAA chose to track hours worked by air traffic
employees. As designed, Cru-X could have provided credible workforce
data for addressing controller concerns about staffing shortages,
related overtime expenditures, and to help determine how many
controllers are needed and where. That information in turn is
especially important given projections of pending controller
retirements. Unfortunately, Cru-X as designed has not been implemented.
We hope it will be in the coming year.
building aviation system capacity and more efficient use of airspace to
PREVENT A REPEAT OF THE SUMMER OF 2000
FAA needs to be strategically positioned for when demand returns
through a combination of new runways, better air traffic management
technology, airspace redesign, and greater use of non-hub airports. It
would be shortsighted to do otherwise. FAA estimates that domestic
passenger numbers are expected to return to 2000 levels by 2005,
although the recovery in passenger traffic will lag by a year for major
carriers. FAA also reports large increases in the use of regional jets
(from 496 in 2000 to over 900 in 2002)--this bears careful watching
because of their impact on FAA operations and modernization efforts.
FAA's OEP is the general blueprint for increasing capacity. As
currently structured, the plan includes over 100 different initiatives
(including airspace redesign initiatives, new procedures, and new
technology) and is expected to cost in the $11.5 to $13 billion range,
excluding the costs to build new runways, but the true cost of
implementing the plan is unknown. FAA estimates the plan will provide a
30 percent increase in capacity over the next 10 years assuming all
systems are delivered on time, planned new runways are completed, and
airspace users equip with a wide range of new technologies.
While airspace changes and new automated controller tools will
enhance the flow of air traffic, it is generally accepted that building
new runways provides the largest increases in capacity. The OEP now
tracks 12 runways scheduled for completion in the next 10 years. Four
of the runway projects are expected to be completed in 2003 at Denver,
Houston, Miami, and Orlando airports. However, construction on several
other airports has been delayed from 3 months to 2 years. There are
other new runway projects not in the plan but important for increasing
capacity, such as Chicago O'Hare. These runway projects are not in the
plan because airport sponsors have not finalized plans or developed
firm completion dates. FAA needs to continue to closely monitor all new
runway projects.
Progress has been made with OEP initiatives, but much uncertainty
exists about how to move forward with systems that require airlines to
make investment in new technologies. FAA and the Mitre Corporation
estimate the OEP would cost airspace users $11 billion to equip with
new technologies. For example, FAA and Mitre estimate the cost to equip
a single aircraft with Automatic Dependent Surveillance-Broadcast
ranges from $165,000 to almost $500,000, and the cost for Controller-
Pilot Data Link Communications ranges from $30,000 to $100,000
excluding the cost to take the aircraft out of revenue service.
FAA is working to retool the OEP. With the slow down in the demand
for air travel, FAA has an opportunity to synchronize the OEP with
FAA's budget and set priorities, and address uncertainties with respect
to how quickly airspace users will equip with new technologies in the
plan. Senior FAA officials noted that hard decisions will need to be
made. Further, some large-scale, billion-dollar acquisitions are not in
the Plan but critical for its success. For example, the Enroute
Automation Replacement Modernization project (new software and hardware
for facilities that manage high altitude traffic with an estimate cost
of $1.9 billion) is not an OEP initiative but needs to be fully
integrated with the Plan and considered when setting priorities.
It is a good time to rethink what reasonably can be accomplished
over the next 3 to 5 years, and what will be needed by FAA and industry
given the decline in Trust Fund revenue and the financial condition of
the airlines. According to the Associate Administrator for Research and
Acquisition, it is likely that the OEP will shift from a plan that
relied heavily on airspace users to equip their aircraft to one that
places greater emphasis on airspace changes and procedural changes that
take advantage of equipment already onboard aircraft.
striking a balance between how airport funds will pay for capacity and
SECURITY INITIATIVES
A major issue for airports is funding the next phase of EDS
integration. Thus far, nearly all EDS equipment has been lobby-
installed. TSA's planned next step (integrating the EDS equipment into
airport baggage systems) is by far the most costly aspect of full
implementation. The task will not be to simply move the machines from
lobbies to baggage handling facilities but will require major facility
modifications. We have seen estimates that put the costs of those
efforts at over $5 billion, and this is an almost immediate issue
facing the airports.
A key question is who will pay for those costs and how. While the
current Airport Improvement Plan (AIP) has provided some funding in the
past for aviation security, we urge caution in tapping this program
until we have a firm handle on airport safety and capacity
requirements.
In fiscal year 2002, airports used over $561 million of AIP funds
for security-related projects. In contrast, only about $56 million in
AIP funds were used for security in fiscal year 2001. Continuing to use
a significant portion of AIP funds on security projects will have an
impact on airports' abilities to fund capacity projects. The following
chart shows how AIP funds were used and for what type of project in
fiscal year 2002.
AIP funds as well as passenger facility charges (PFCs) are eligible
sources for funding this work. However, according to FAA, PFCs are
generally committed for many outlying years and it would be difficult,
requiring considerable coordination among stakeholders (i.e. airports
and airlines), to make adjustments for security modifications at this
point. The following chart shows how PFC funds have been used since
1992.
There have also been proposals to raise the cap on PFCs; however,
we urge caution before adding additional fees or taxes for air travel.
Consumers already pay a significant amount in aviation taxes and fees.
For example, a non-stop round-trip ticket costing $200 may consist of
nearly $33 in taxes and fees, or 16 percent of the fare. On a
connecting flight, the taxes on this ticket could be up to $51, or
nearly 26 percent of the fare. Any further increases are likely to
reduce airline revenues, given the weak demand environment and will
further threaten the financial health of the industry.
AVIATION SAFETY
The U.S. air transport system is the safest in the world and safety
remains the number one priority for FAA. Until the recent Air Midwest
crash in Charlotte, there had not been a fatal commercial aviation
accident in the United States in 14 months.
Progress has been made this past year in reducing the risk of
aviation accidents due to operational errors and runway incursions.
Operational errors (when planes come too close together in the air) and
runway incursions (potential collisions on the ground) decreased by 11
percent and 17 percent, respectively, in fiscal year 2002.
Notwithstanding these improvements, operational errors and runway
incursions should remain an area of emphasis for FAA because at least
three serious operational errors and one serious runway incursion (in
which collisions were narrowly averted) occur, on average, every 10
days.
In the current financially-strapped aviation environment, FAA must
remain vigilant in its oversight to sustain a high level of aviation
safety. FAA has recognized this need and has taken steps to heighten
surveillance during times when airlines are in financial distress. For
example, FAA has increased the number of inspections planned for
distressed air carriers' internal aircraft maintenance operations. We
are beginning an audit of this issue in the next several weeks.
FAA also needs to pay close attention to the level of oversight it
provides for repair stations. In the past 5 years, there has been a
significant increase in air carriers' use of these facilities. In 1996,
major air carriers spent $1.6 billion for outsourced maintenance (37
percent of total maintenance costs), whereas in 2001, the major air
carriers outsourced $2.9 billion (47 percent of total maintenance
costs).
Even as air carriers currently outsource close to half of their
maintenance work, FAA has continued to focus its surveillance on air
carriers' in-house maintenance operations with no comparable shift
toward increased oversight of repair stations. For example, FAA assigns
a team of as many as 27 inspectors to continuously monitor air
carriers' internal maintenance operations, while typically, only one to
two inspectors that have other collateral duties are assigned to
monitor work performed at aircraft repair stations. Because use of
repair stations represents a less costly way of getting maintenance
work completed, the trend in outsourcing maintenance is likely to
continue. FAA needs to consider this shift in maintenance practices
when planning its safety surveillance work.
Another significant issue is the pending wave of controller
retirements. In May 2001, FAA estimated a total of 7,195 controllers
could leave the agency by the end of fiscal year 2010. In general, the
training process to become a certified professional controller can take
up to 5 years. Given that time lag, FAA needs to take actions now to
address when and where new controllers will be needed. The pending
retirements underscore the need for an accurate labor distribution
system. We will be starting an audit of controller training in the next
several weeks.
That concludes my statement, Mr. Chairman. I would be pleased to
address any questions you or other members of the Subcommittee might
have.
Senator Shelby. Secretary Shane, welcome to the committee.
Office of the Secretary
STATEMENT OF JEFFREY N. SHANE, UNDER SECRETARY FOR
POLICY
Mr. Shane. Thank you, Mr. Chairman, and ranking member
Murray, Senators Bennett and Dorgan. It is always a pleasure to
appear before you, and it is today. We appreciate very much
your holding this hearing.
I believe I can summarize my prepared remarks referred to
by Senator Murray earlier, and do them fairly briefly. I will
skip the part where I talk about how closely the Administration
is monitoring industry developments. And I think Ken Mead has
also covered a little bit of the ground, so I can be quick.
Almost 3 months ago, in testimony before another Senate
committee, I outlined the challenges facing the industry and
pointed at the record losses that had occurred during calendar
year 2001 and that were continuing into 2002.
Wall Street analysts, even before the war in Iraq, were
predicting about $6.5 billion dollars in additional industry
losses for 2003. We now know that these losses could be even
higher if the conflict results in an extended period of reduced
demand for air travel.
The airline industry has proven over the years to be
remarkably resilient, however, and it is important to note that
the news even now is not all bad. Despite heavy losses for the
industry overall, for example a number of low fare airlines
have remained profitable, and have been expanding their
operations despite the downturn in demand.
At the same time, our largest network airlines are making
progress in controlling their costs. USAirways, as we all read
the other day, emerged from bankruptcy 2 days ago. And
American, despite a lot of concern in the market, has been able
to avoid bankruptcy. That is because both carriers have found
ways to reduce their cost structures dramatically and to retool
their business plans. Other airlines are making similar
progress.
I have appended to my prepared statement some charts that
illustrate the current state of the industry and the challenges
that it is facing, particularly since the start of the war in
Iraq. What I would like to do is summarize those charts very,
very quickly.
I apologize, I did not bring blow ups of the charts. I
believe that we have made sufficient copies available so that
everybody has copies. If that is not the case, please let us
know and we will supply them right now.
Chart 1 really covers ground that Inspector General Mead
covered. It really just demonstrates how, in fact, the long
period of record profits during the 1990s was transformed into
a period that we now know to be record losses beginning in late
2000 and early 2001.
Chart 2 shows system operating profits or losses over the
last 3 calendar years. But it is important because the airlines
are divided, in that chart, into three different groups. The
first group includes our largest network carriers. And the
third group are low fare carriers.
I apologize for the airline codes that we used to identify
the airlines. We actually have a legend. They are not all self-
evident. So we can supply you that to make clear who the
airlines are that we are talking about.
The important message from this chart is that while the
industry as a whole has sustained operating losses approaching
$10 billion for each of the past 2 years, the low fare
carriers, as I indicated earlier, have indeed continued to earn
profits.
Chart 3 shows system-wide operating margins. Note the
contrast between the double-digit negative operating margins
for the large network airlines and the low fare carriers'
positive operating margins during this time.
Our review of recent information suggests that the
financial trends observed in the quarterly data throughout 2002
are continuing into 2003.
Chart 4 compares weekly traffic levels, beginning in mid-
December 2002, for those Air Transport Association member
carriers that have international routes with traffic levels
from a year earlier. It shows that from mid-December of last
year to the end of January, traffic was up slightly over a year
before. A pronounced downward trend begins in February,
however, and accelerates after the start of the conflict in
Iraq, especially for trans-Atlantic traffic.
Finally, chart 5 compares daily traffic for the same
carriers beginning March 12th of this year with traffic a year
earlier. Initially the trend is up slightly but then declines
sharply at the start of the hostilities. By March 26th, traffic
was down about 20 to 25 percent for each of the regions shown
on the chart.
So where does this leave us? Many airlines have suffered
large losses for more than 2 years, are heavily leveraged, and
are now dealing with steep declines in demand. Does this mean
that the airline industry is doomed to fail? Certainly not. But
there will be change. Airlines are working hard to do what they
must do to survive and to eventually return as viable
competitors.
We are going to get through this. My personal conviction is
when we do, the industry will look a lot like the industry we
have today except that it will be more cost-effective, more
competitive, and more robust.
Let me just say one thing particularly in response to
Ranking Member Murray's comments about Secretary Mineta's
statement for the press last night. Secretary Mineta, I hope
everybody knows, has been a consistent champion of some limited
temporary assistance to the airline industry. There has never
been any question about that. My testimony was prepared at a
time that productive negotiations were already underway between
the Administration and Congressional leadership. Those
negotiations, I hope, are continuing.
There is, as the secretary said, a considerable gulf
between where the Administration believes we should come out
and where the House and the Senate votes yesterday set the
numbers.
We should continue to negotiate. I think the biggest
difference, if I can just comment on this briefly, and I know
we will have a colloquy about it afterwards, is that it is
important to recognize that USAirways came out of bankruptcy on
Monday. It is important to recognize that through heroic
efforts American Airlines has been able to reduce its cost
structure such that it did not have to go into bankruptcy.
Other airlines are doing exactly the same thing.
The question for the Congress and for the Administration
must be what measure of assistance is appropriate given the
absolute duress the industry is in without compromising or
interfering with a process that this industry has to go
through. Otherwise, if it does not go through this process now,
if it does not retool itself, if it does not fix itself for the
future, we will face this issue every time there is another
crisis and it will be a perennial albatross for every
administration and for every Congress that succeeds us.
PREPARED STATEMENT
That is really the discussion that we should be having. We
believe that some assistance is appropriate. The level of that
assistance is the only thing that separates the Administration
and Congress right now.
Let me stop right there and I do look forward to any
questions you may have. Thank you.
[The statement follows:]
Prepared Statement of Jeffrey N. Shane
Chairman Shelby, Ranking Member Murray, and Members of the
Subcommittee, I appreciate the opportunity to appear here today to
discuss the state of the airline industry.
As you are well aware, these are extraordinary times for the
airline industry. Significant challenges are occurring virtually every
day. The Administration is working hard to keep up with these
developments and to assess their near-term and longer-term
implications.
Almost three months ago, on January 9, in testimony before the
Senate Committee on Commerce, Science, and Transportation about the
future of the airline industry, I pointed to record losses during
calendar year 2001, continuing heavy losses during 2002, and into 2003.
We now know that the predictions for large losses during 2002 were
correct, and Wall Street analysts, even before the war in Iraq, had
changed their loss predictions for 2003 from the range of $2.5 to $3.0
billion to about $6.5 billion. The large network airlines that today
account for a major part of our domestic passenger air transportation
system account for most of these losses. The war in Iraq may both
reduce their revenue and increase their losses in 2003.
In my testimony three months ago I also pointed to the fact that
the airline industry has proven to be remarkably resilient over the
years, and that not all news was bad. Despite the overall heavy losses
for the industry, and in stark contrast to the experience of the large
network airlines, a cadre of low-fare airlines had remained profitable
and was rapidly expanding. This trend has continued as well.
In addition, we now see individual large network airlines making
progress in getting their costs under control. For example, USAirways
has emerged from bankruptcy, and American has thus far avoided it, in
part because they have been successful in reducing their costs by
restructuring labor costs and overhauling their business plans. Other
large network carriers have also progressed with their cost control
efforts.
Many issues are now at play--structural issues that emerged before
September 11, the aftermath of the September 11 terrorist attacks, the
sluggishness of the return of air travel demand, and the war in Iraq.
How all of this is resolved will have major consequences for the
airline industry and related industries, and, indeed, our economy for
many years to come.
To provide context, before getting into more specific details about
what is driving the financial plight of much of the industry, an
important deregulation development must be briefly discussed.
Specifically, two very different types of carriers have evolved--large
network carriers and low-cost carriers. Generally speaking the former
are pre-deregulation carriers and the latter are new airlines that
evolved after deregulation. To a certain extent these two types of
airlines serve different types of markets, have different business
strategies, and focus on different customers, even when they operate in
the same geographic regions.
A basic reason for the emergence of the low-fare airlines is that
this was the only effective response to the powerful networks that were
quickly built by the pre-deregulation airlines. Low costs allowed the
new carriers to charge such low fares that they could profitably serve
a demand sector that was mostly unserved by the large network airlines.
While these airlines, other than Southwest, struggled for years to
establish a competitive toehold, several have now done so. Almost
ironically, while the low-cost strategy was initially pursued as a
vehicle for coexisting with the larger, dominant network airlines, the
success of this strategy now poses a challenge to the continuing
viability of the larger airlines unless they too are successful in
their own efforts to control costs.
But both types of operation are vital components of our Nation's
air transportation system. Low-cost airlines are an increasingly
important element of our commercial air travel system. Their
substantially lower costs enable them to provide capacity for price
sensitive passengers, and to price compete for time sensitive
passengers who are otherwise faced with substantially higher prices.
But the traditional ``major'' airlines, through their feeder systems,
serve an unmatched variety of markets--including a great many smaller
communities that would not be on the aviation map without them. Over
the course of many decades our largest airlines have established
critical international franchises as well--links to foreign markets
that are essential to trade and economic growth.
The simple truth is that the markets for air travel are best served
by airlines pursuing diverse strategies, and just one category or the
other is unlikely to adequately and efficiently serve demand. That is
why we cannot be cavalier about any part of the industry, and why the
Administration is watching developments so closely.
With this background I will now briefly address the various changes
and events that have contributed to the situation facing our major
airlines today by directing your attention to a series of charts. Chart
1 shows why a long period of record profits for the airline industry
abruptly came to an end well before the September 11 terrorist attacks.
This chart shows trends both in unit revenues, or operating revenues
per available seat mile, known as RASM, and in unit costs, or operating
expenses per available seat mile, known CASM. Note that for several
years CASM increased very slightly, compared with much larger increases
in RASM. These trends portray a period of solid revenue growth and cost
control underpinning continual profitable operations, indeed several
years of record profits. But the combination of increasing costs
beginning in 1999, and declining demand starting in early 2001, turned
record profits into losses. Indeed, the decline in industry
profitability for the year ended June 30, 2001, compared with a year
earlier, was the largest year-over-year decline ever, before September
11. The losses for the year ended June 30, 2001, were not record
losses, but that too changed abruptly with the terrorist attacks.
Chart 2 shows system operating profits or losses by quarter for the
last 3 calendar years for the large network carriers, and a number of
other airlines including a group of low-cost carriers. These carriers
account for over 90 percent of the passenger industry. Note first, that
these carriers collectively have sustained operating losses approaching
$10 billion for each of the past 2 years.\1\ Observe, however, that the
group of low-fare carriers has continued to earn profits during this
same time, and that this is not just attributable to Southwest. Five of
the six low-fare carriers earned profits in 2001, and half of them
earned profits in 2002, while two of the other three were close to
break even. Note next, that the last profitable quarter for the large
network carriers was the third quarter of 2000, and also, these
carriers continued to suffer sizeable losses throughout 2002. It is
especially important to note that these carriers' losses have
accelerated since the second quarter, including the third quarter,
which is normally their best quarter of the year. Despite the
disastrous losses during the last two quarters of 2001, total losses
for calendar 2002 approach the same levels. Indeed, in reality 2002
losses were even greater given that these six large network carriers'
operations were considerably smaller.
---------------------------------------------------------------------------
\1\ Fourth quarter 2002 data are preliminary and subject to change.
---------------------------------------------------------------------------
Chart 3 shows systemwide operating margins (operating profit or
loss divided by total revenues), and, as just indicated, the negative
operating margins of the large network carriers were even greater in
2002 than a year earlier. Note also that this varies greatly from
carrier to carrier. During 2001, for every $5 collected by American and
United in revenues, they had $6 of costs. You can also see that during
the first three quarters in 2002 for which we have final results these
tendencies do not change much for either carrier. Finally on this
chart, note that in contrast to the double-digit negative operating
margins for the large network airlines, the low fare carriers earned
very respectable positive operating margins. Indeed, the margins for
these carriers in 2001 exceeded those for the network carriers for
2000.
In addition to the financial information the airlines file with the
Department every quarter, they also file preliminary data on a monthly
basis. While this information is subject to change, we believe it can
be relied upon to reveal general tendencies. Our review of this
information suggests that the financial trends you have just observed
in the quarterly data throughout 2002 are continuing into 2003. Indeed,
the results for the large network carriers in January 2003, or 16
months after the September 11 terrorist attacks, are no better than a
year earlier, despite the fact that travel demand was still severely
depressed.
With this context, please look at Chart 4. This compares weekly
traffic, in terms of revenue passenger miles, for Air Transport
Association member carriers that provide international service,
beginning for the week ended December 15, 2002 with traffic a year
earlier. This shows that from mid December 2002, to the end of January
2003, traffic was up slightly over a year earlier. Then note the rather
marked downward trends beginning with early February. Next, note the
increased rate of decline at the time of the first strikes in the war.
This information is broken down into four major traffic categories,
and, as would be expected, transatlantic traffic has suffered the
greatest decline.
Chart 5 compares daily traffic for the same carriers beginning
March 12, 2003 with traffic a year earlier. Initially the trend is up
slightly until the Azores Summit. Traffic then plummets after the 48-
hour ultimatum, and again as the war starts. Note that by March 26,
traffic is down from about 20 to 25 percent for each category.
Subsequently, the year-over-year declines eased up for several days
before worsening again for all but the domestic category.
So where does this leave us? Many airlines, including the large
network airlines that now provide the bulk of airline service in the
United States, have consistently suffered large losses for more than 2
years, they are heavily leveraged, and now, once again, they see
airline demand in steep decline for some unknown period. Does this mean
that the airline industry as we know it today is doomed to fail? No,
but there will be change. Airlines that are in trouble are all working
hard at what they must do to survive and eventually return as viable
competitors. How quickly and to what extent they recover will depend
largely on three factors: how much they are able to reduce their costs,
the recovery of travel demand, and the extent to which carriers reduce
capacity in light of the now-diminished level of demand.
While my focus here today is the financial state of the airline
industry, this painful process affects everyone in the aviation
industry: aircraft lessors and investors, aviation vendors, airports
and their concessionaries, and--more than anyone else--airline
employees. Since September 11, more than 100,000 airline employees have
lost their jobs. Just in the past 2 weeks airlines have announced an
additional 10,000 layoffs. The aircraft industry has also been hard
hit. Of the 7,525 jet aircraft available for service today, 971 are
either stored or temporarily inactive.
We are going to get through this. My personal conviction is that
when we do, the industry will look a lot like the industry we have
today, except that it will be more cost-effective, more competitive,
and more robust.
As many of you know, the Administration has recently unveiled its
proposal, Centennial of Flight Aviation Authorization Act as a
successor of AIR-21, which expires at the end of this fiscal year. A
lot of people at FAA and in the Office of the Secretary have spent a
lot of time over the past several months developing those proposals,
and we are proud of them. They would promote the industry's growth and
vitality while retaining safety as our top priority. We plan to
reinforce our commitment to safety by making substantial investments in
National Airspace System infrastructure and ensuring that our highly
trained controller workforce is fully capable of sustaining its high
levels of performance over the course of the next reauthorization
period and beyond.
Our proposal will also ensure that we are prepared for the demand
levels predicted in the FAA's recent industry forecast by continuing to
fund airport capacity enhancements at record levels and restructuring
Airport Improvement Program formulas and set-asides.
CONCLUSION
Mr. Chairman and members of the Subcommittee, thank you for the
opportunity to testify here today. I look forward to responding to any
questions you may have.
RELIEF TO THE AIRLINE INDUSTRY
Senator Shelby. Secretary Shane, as you know, the committee
reported a Supplemental Appropriations Act yesterday that
included provisions to provide some relief and assistance to
the aviation industry for relief to the airlines. Do you
believe it is better to lower carrier costs in the form of a
temporary suspension of security fees prospectively for a
period of time or to reimburse carriers for security fees that
they have already paid to the government?
Mr. Shane. Well, either formulation will deliver relief to
the industry and I am not sure the industry itself is of a view
about which is preferable. I would evaluate those two scenarios
essentially in terms of ease of administration.
The most important lesson we took from the compensation
program that Congress enacted immediately after 9/11 was that
the process of evaluating claims, if you are creating a system
in which airlines are required to document costs, document
claims in a complicated way, and then the Department of
Transportation necessarily has to validate all of those claims,
the amount of time that we simply have to expend in order to
validate the claims is such that it is inconsistent with what
we are trying to do with the program, which is deliver the
relief in real-time.
The reason we have to do it is that my friend, Ken Mead,
right here will have something to say about it if we are not
vigilant in the way we evaluate those claims.
Senator Shelby. He should have something to say about it.
Mr. Shane. That is right. That is why I think if we are
looking at various forms of assistance to the industry right
now, the Department of Transportation would strongly favor a
system in which we simply either reimburse or forgive fees that
the industry incurs. It does not require subjective evaluation
of whether these are really the amounts that we should be
paying. We know what those amounts are. They are written down
someplace. We just write checks.
REIMBURSEMENT TO THE CARRIERS
Senator Shelby. Let me follow up on that.
One of my concerns with the reimbursement to the carriers
is that the payment would include the fees that are paid by the
passengers. I do not know why we would levy a fee first on the
flying public and then pass that directly to the airlines.
Mr. Shane. The airlines, in this environment, maintain that
they are not able to pass that fee along to the carriers, in
fact, that there is no market power whatsoever in this market,
and that, in fact, they are absorbing that fee. It is supposed
to be passed along and in a normal environment you would expect
it to be passed along and tacked onto the ticket.
The fact is the prices in the market right now are what the
market sets and there is no incremental amount that you could
say is, in fact, passing on a fee to the passengers.
OPERATIONAL EVOLUTION PLAN
Senator Shelby. The FAA has a plan for enhancing capacity
called the Operational Evolution Plan or the OEP. Since the OEP
was first published, the aviation industry has been hard-hit by
the economic downturn of 9/11, increased security costs, and
rising fuel prices. I want to address this question to you,
Madame Administrator.
With the industry in such upheaval, what changes are being
made to the OEP to adjust to the new realities in airline
operations and the market environment?
Ms. Blakey. It is a good question because certainly there
is a dynamic there that I think we have to respond to in real-
time. For an organization like the FAA that depends
tremendously on consultation with the industry and the research
community to construct a solid plan, this is certainly calling
us to really step up real-time on this.
We just issued a new version of OEP, 5.0, which does stay
the course for a 10-year period to get 31 percent additional
capacity at the end of 10 years. It is a good plan. It is one
that there is a remarkable degree of consensus in the industry
and in the affected communities that it makes sense.
That said, what I have asked that we do is develop a very
intensive approach. We call it the skunk works, to look at the
OEP and say okay, what could we put on the fast-track here that
number one, will not burden the industry; number two, is
develop technology; and number three, could be implemented in
the next 1, 3, 5 years at the outside. Not the 10-year horizon.
Let us see what we can do in terms of really fast-tracking some
of this.
So far the staff has come up with some very interesting,
and I think productive, avenues. We are going to vet them in
the next month or 2 with the industry and with others before
taking this out. But I think this is going to yield some more
immediate results, if you will, from that standpoint.
Senator Shelby. Mr. Shane, the Aerospace Commission
recommended making the transformation of the U.S. Air Traffic
Management System a national priority. What confidence do you
have that the FAA and the OST are making the necessary changes
to the OEP, as warranted by the call to action by the Aerospace
Commission?
Mr. Shane. Thank you, Mr. Chairman.
I have great confidence in that. The reason I have such
confidence is that Administrator Blakey and I have talked about
that issue dating back to before the Aerospace Commission
actually issued that report. The Administrator is absolutely
committed to giving life to some of the vision in the report.
We have spoken to Secretary Mineta about it and the Deputy
Secretary, Michael Jackson, as well.
I think in the not-too-distant future we will probably have
a more concrete announcement for you. But at this point, there
is not any question that we are on a path to realizing that.
RISING OPERATING COSTS
Senator Shelby. A major cost driver of FAA's rising
operating costs has been salary increases from collective
bargaining agreements negotiated under FAA's personnel reform
authority. Mr. Mead's prepared statement indicates that
controller salaries have increased by 47 percent--47 percent
since 1998.
Can you compare the increase in salary for air traffic
controllers from 1998 through 2003 to other work forces inside
FAA, as well as other Federal Agencies?
Also, what can you tell us about overtime costs and other
cost drivers that are due to memorandums and MOUs related to
controller contracts?
Ms. Blakey. The Inspector General has focused on this
issue. And in fact, is undertaking an audit on just that issue
right now. This goes to the issue of a contract that was
negotiated in 1998 which did substantially increase the
compensation for controllers.
As time has gone on there have also been a number of
additional, if you will, side agreements, these memoranda of
understanding which, in some cases, do add on costs in terms of
the way the system is running. There are about 1,500 of these,
many of which are perfectly fine and address operational work
rules et cetera.
But there are some that without doubt add to the cost of
this contract substantially, as well as ones that really do
infringe on the rights of management to deal flexibly with the
demands in traffic and in the kind of management that the
system needs from an efficiency standpoint.
We are very committed to working with NATCA to address
those issues. This is something that we have already notified
the union that we do have a number of those that have been
pointed out by the Inspector General that fall under the
category I just discussed, that we need to sit down at the
table and review and come to a more efficient way of operating
from the standpoint of the taxpayer's money.
Senator Shelby. Mr. Mead, do you want to comment on that?
Mr. Mead. I appreciate Administrator Blakey's movement to
get their hands around this.
One thing that was pretty alarming to us was that nobody
knew how many of these deals or memoranda understanding
existed. There was no inventory. In fact, as part of our audit
effort we probably started developing the inventory. And they
have very large financial impacts.
As Administrator Blakey says, a lot of them are legitimate
and are needed, but we really ought to know what the cost
impact of them is.
RELIEF PACKAGE FOR AVIATION INDUSTRY
Senator Shelby. Senator Murray.
Senator Murray. Thank you, very much, Mr. Chairman. Mr.
Shane, thank you for your testimony.
I just want to go back to this again because we are trying
to work through this. The Senate had a $3.5 billion aviation
package. The House has $3.2 billion. And again, as we noted,
Secretary Mineta said there is a huge gulf here.
I just wanted to see if you would help us pin this down a
little better and tell us precisely what the structure of a
relief package the Administration will support and what amount?
If you could tell us, we would really appreciate it.
Mr. Shane. I really have not been involved personally in
the negotiations that have been taking place. I am aware of
them. And I would simply ask that I be excused from trying to
give you an amount, because I really did not come authorized to
talk amount, and it would be interfering with, I think, a
conversation that is going on that I am not privy to.
The structural issue is, as I said in response to the
Chairman's questions, that we would emphasize the importance of
ease of administration. Let us find a set of security fees that
we can quantify easily and that we can either forgive or
reimburse on day one, simply because those numbers are readily
available. If we go beyond that and get into a variety of
imponderables and airlines then begin putting claim documents
together--first we have to figure out a form. They will have to
fill out the form, and then we have to evaluate the form. Weeks
and months can go by before they will see any money from a
process like that. And that is inconsistent with what they need
right now in our judgment.
So we would urge whatever the amount, which is going to be
the product of a negotiation, I expect, whatever the amount, it
should be an amount that is delivered in a very transparent and
easily administered form.
Senator Murray. So you have not heard any specific number
mentioned by the Administration whatsoever?
Mr. Shane. I am not--well, I have heard a lot of numbers
but I really do not know precisely, because honestly it is
taking place way above my pay grade, where the Administration
is at the moment.
Senator Murray. Specifically let me ask you, as part of the
amendment we passed yesterday, we put in funding for expanding
unemployment insurance for laid-off workers. Do you find that
to be a reasonable part of the package?
Mr. Shane. Well, I am an undersecretary of transportation,
not an undersecretary of labor and Department of Labor really
would be the proper agency to comment on that.
I would just say generally that typically we extend
unemployment insurance benefits in times when unemployment
across the country is 10 percent or more. There have been two
extensions, as I understand it, of unemployment benefits thus
far in an environment in which the unemployment rate was in the
neighborhood of 5 to 6 percent.
So my guess is the Administration will say it is
inappropriate to extend those unemployment benefits yet again.
It would be an extraordinary thing to do.
Senator Murray. This is for aviation workers and I
understand they have had the triple whammy. They had September
11th, they have had the downturn in the economy. And now, with
the Iraq war, we have had 10,000 lay-offs from aviation and
related industries just since the war started. This is not
something somebody did to make this happen. These are country-
wide, nationwide, worldwide issues that have impacted these
employees. Certainly the Administration would have sympathy for
that.
Mr. Shane. I think the Administration has enormous sympathy
and there is no question that the workers have taken it on the
chin in a way that we have not seen before. There are a whole
variety of programs that are available to the workers including
national emergency grants and training programs and
reemployment programs.
Again, I am way out of my depth in talking about the Labor
Department's programs and I really do not want to get much
further into it. But I have no reason to think that the
Administration is going to be supportive of yet another
extension, even for a particular sector.
There is a fairness element. Industries across the board
are suffering as a result of the environment that we are living
in today. A lot of it can be attributed to the same causes that
the airline industry's problems are attributable to. It is just
difficult to explain to people in another sector why it is that
you have chosen this sector to provide special benefits to.
POST-9/11 IMPACT ON AVIATION INDUSTRY
Senator Murray. They have had a huge impact over the past
2\1/2\ years, or 1\1/2\ since September 11th.
What about the airlines? We put incredible pressure on them
in terms of safety and security since September 11th, and
certainly our airports as well. Massive requirements that we
have put on top of them. Do you not think that has some kind of
impact on their ability to avoid bankruptcy?
Mr. Shane. There is no question that the Government has
picked up a tremendous amount of the cost of the security that
we have laid on. We have taken over all of the airport
security. Those are all Federal workers now. They used to be
airline employees.
There is a tremendous amount that has been done. There has
been the $15 billion from 9/11. The question now is whether or
not we are going to start finding ways of gifting the industry
with so much more assistance that we take them off the track
that they are on, leading to a perpetuation rather than a
solution of the problem. And that is a genuine concern.
Senator Murray. But would you not agree that we have
required a lot of our airports and our airlines in terms of
security that has added a burden at a time when they are still
struggling because of the economy?
Mr. Shane. Yes, and we are also requiring a lot of every
other sector of the transportation industry and I am not aware
that we have picked up any portion of the costs that other
transportation sectors are being required to bear or will be
required to bear.
Senator Murray. I would just argue that the aviation
industry has, in fact, really been hit because obviously
September 11th had an impact on people's willingness to travel
by air. And certainly that has not eased in the last months and
certainly not since the war in Iraq started, would you not
agree?
Mr. Shane. It eased and then it went down again. Yes, the
war in Iraq has been obviously a repeat in terms of the actual
adverse impact on demand.
But again, without trying to suggest that we are out of the
woods in any way, or to suggest that it is inappropriate to
think about some additional assistance. That is not the
position of the Administration. What we are saying is that it
is important that we calibrate that additional assistance in a
way that does not compromise what the industry must do now if
we are to have a viable air transportation system going
forward.
SUPPLEMENTAL APPROPRIATIONS ACT
Senator Murray. Let me just ask you, do you foresee a
scenario where the President would veto the supplemental if we
do add $3 plus billion for aviation?
Mr. Shane. I have not had that conversation with anybody in
the White House. I have no answer for that.
Senator Murray. I know you are not going to let me pin you
down, but there is a rumor swirling that the Administration has
drawn a line in the sand at $900 million. That is about a
quarter of the size that the House and Senate versions both
have in them. Have you heard that figure and do you think that
figure includes any help for workers?
Mr. Shane. Somebody reported to me that that figure was in
the press, but I had not heard it anywhere else. So I have no
way of knowing whether that has any validity whatsoever as a
negotiation position or an Administration position.
Senator Murray. So you have heard nothing about what is in
any kind of formal talks from the Administration, whether it
includes work for employees, whether it includes airports, what
kind of structure for the airlines? You have heard nothing?
Mr. Shane. I have heard that we have circled around the
idea of a very limited, targeted form of assistance, along the
lines that I was suggesting which is related specifically to
the security fees that are paid by passengers now and paid by
the industry.
That is as much as I have heard. I do not know more than
that. I do not know what would be acceptable at the end of the
day to the Administration. I do know that it would be
substantially less than the amount voted in either house of
Congress yesterday.
Senator Murray. I am sorry, it will be substantially less
than?
Mr. Shane. An amount acceptable to the Administration would
have to be substantially less than was voted in either house of
Congress yesterday. That was what Secretary Mineta was saying
last night.
Senator Murray. Would it include anything for airports?
Mr. Shane. No, I do not believe that we had anything in
mind for airports. Again, I do not mean to be cute here. I am
just getting a little bit beyond my depth because this
negotiation has been taking place, I believe, between White
House staff members and members of Congress. And I have not
been privy to those personally. In recent days I am not even
sure any of us at the Department have been privy to them.
Senator Murray. I will hold on my other questions and let
other members of the committee respond and then come back to
Ms. Blakey. Senator Bennett?
STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. Thank you. This is an interesting picture
that you have painted for us here this morning. And as I go
through it, I ask myself how much can the Government do about
it. Because many of the things that I see that ought to be done
are things that probably ought to be done by the airlines
themselves.
First, let me just make a few comments and then I will
engage in a dialogue here. You referred to Southwest and Jet
Blue as the low-cost carriers. You are aware that Jet Blue's
fares are higher than their competitions? Were you aware of
that?
To fly from New York City to Fort Lauderdale on Jet Blue is
$36 more than to fly on their competitor. And the reason is
that experience on Jet Blue is $36 better than the experience
on their competitors. People who fly Jet Blue become
tremendously loyal, almost fierce defenders of the Jet Blue
experience and say we want to fly Jet Blue wherever you go.
I think there is a lesson there that I do not know what
Government can do about. But when I was in business I focused
tremendously on consumer satisfaction.
We now have a circumstance where consumers are almost
driven away from air travel by the experience. Jet Blue goes
out of their way to do everything they can to create a
worthwhile experience and they can charge higher fares, thus
saying to us that air travel is not a commodity. There are
alternatives. We think of commodities, we think of competition
and commodity, it is solely on the basis of price. There is
competition on the basis of consumer satisfaction.
Again, if you could think of something the Government could
do to get airlines to try to make the experience more
satisfactory, and thereby people would be willing to pay a
little more to have the experience, instead of going there only
when they have no other alternative.
One thing we could do which probably does not fall in your
department is to reduce the hassle factor around security. I am
as concerned as anybody about security but if I were running
the airline industry as a whole as a business, I would
certainly do something about the experience you get with TSA.
Now TSA, to its credit, is a better experience than it used
to be following September 11th in that period when it was still
contracted out to others. The TSA people are substantially more
professional and handle that experience with a better sense of
consumer satisfaction than you used to get.
I remember when I was in the Department of Transportation
when hijackings began, we talked about--forbidden word--
profiling as a way to deal with hijacking. Now it is not
politically correct to even use the word unless you are using
it in speech to denounce it.
But airlines know their customers. Do a background check on
a frequent-flier and discover that that frequent-flier is not,
nor has ever been, nor ever will be connected with a terrorist
organization. Cannot that frequent-flier, thus checked out, and
not picked on the basis of so many miles, but checked out with
an actual profile, be given a pass?
We senators come into the Capitol without having to go
through a security check because the Capitol Police knows who
we are. I am not suggesting that we get to the point where
everybody has to be carefully identified, but would it not help
the business flier to want to get back on the airplane if he or
she knew, properly profiled and in an identity bank and even
with biometrics--you put your hand on a screen, so as you go
through they know that is who you are you get to go by without
having to strip all the way down to taking off all your shoes
and the kinds of things we go through now?
BUSINESS TRAVELERS
We have got to get the business traveler back on the
airplane. If you are making a business decision and you are
going to go downtown from Washington to New York City, you say
well I have got to be at Reagan at least 1 hour before they
takeoff. And it is going to take me 20 minutes to get from my
office to Reagan. So this is 1 hour, then a little extra, 1\1/
2\ hours before I get on the airplane. And then it takes me 1
hour to fly to LaGuardia, so that is 2\1/2\ hours. And then,
depending on the time of day, it is going to take me a half
hour in good times and 1 hour in bad times to get from
LaGuardia to downtown New York. Very, very strong incentive to
be on the Metroliner.
I happen to think that is a good idea. I would like to see
more people on the Metroliner. But that same phenomenon is what
is driving people in other markets to the highways. That is the
competition for the airline, not the train. It is the highway.
Testimony shows the highway is less safe, more congested. We
have to appropriate money for highways to deal with the
increased traffic there.
How do we get people back on the airplane? We make it a
better experience and, aside from dealing with that TSA thing,
I do not know quite what Government can do in this area.
I just want you to think about that and see if you can come
up with any.
Now, moving quickly, and I apologize to my colleagues for
taking so much time. But in this morning's Wall Street Journal,
a new airline policy, kill United. Did any of you read that? If
not, read it and I would be interested in your response.
Again, when I was at the Department of Transportation, we
had to deal with serious problems in the railroad industry, and
that is referred to in this piece, where we dealt with the Penn
Central bankruptcy. I remember all of the ins and outs about
the Penn Central bankruptcy. It was an important part of my
tenure there.
Now we are going through bankruptcy in the airline industry
and this is a suggestion based on a railroad experience. When
Conrail was broken up and Conrail's routes were given to the
two competitors, and they are saying United should be broken up
and their facilities given to competitors to reduce capacity in
a way that is rational.
With that rant on those two areas, do you have any comments
or suggestion as to what we can do, looking at it not from the
standpoint of legislation or budget, but from the standpoint of
overall approach to this tremendous problem that you have
presented to us here this morning?
Mr. Shane. First, Senator, let me just say I remember
fondly your days as an Assistant Secretary of Transportation.
You probably do not remember, but we were colleagues back then.
Senator Bennett. You stayed in the industry.
Mr. Shane. I have been in and out more times than I care to
remind myself of but I am in at the moment.
TSA
Let me just say, in response to the hassle factor, the most
important thing you said is that it is much reduced. That TSA,
which is as you noted no longer part of the Department of
Transportation but now part of the Department of Homeland
Security, has performed heroically in the course of the last
year.
There is no question that there were enormous growing pains
and that the hassle factor became a buzz in the business
community. Nobody would fly because of all the reasons that you
cited.
I do not see that today. I am speaking anecdotally, I know,
but the fact is that my impression is average waits are about
what they were prior to 9/11. TSA and its very professional
cadre of screeners have done an enormous job of bringing that
wait time down, so that you really do not have to plan very
differently now for an airplane ride than you did prior to 9/
11. And enormous credit goes to the folks at TSA who have made
that happen.
There is a profiling system that TSA is working on. It is
called CAPPS-2. You have undoubtedly read about it and it does
embrace much of the vision that you have for making the process
easier to create greater confidence in our knowledge of who, in
fact, is boarding an airplane. I have no doubt that, as time
passes, we will have a much improved system for looking at
passengers and not having to put everybody through the wringer
on a random basis.
AIRLINE INDUSTRY
As to how you get people back on the airplane, I think the
Congress should be very proud of what it did in 1978 when it
deregulated the industry. We have been to hell and back in this
industry any number of times since that time but Congress has
always stayed the course.
I am old enough to remember in the early 1980s when the
industry was here, in Congress, talking about worst ever losses
in the industry since the beginning of time. The same claims
were made in the beginning of the 1990s. And we had meetings
with the industry about what form of assistance might be
appropriate. Serious consideration was given to that. There
never was any assistance back then.
I do not pretend that any of that was anything like what we
have going on today. This is a world apart from even those long
dark nights of the soul that the industry went through.
But we have never veered from the conviction that we have
as a country that the best solution for this industry is to
allow the market to work. When we are prepared to go forward
and provide some assistance in the current environment--and I
am repeating myself here, I realize--we have to be mindful of
the importance of letting the industry make the changes it has
to make if, in fact, it is going to be viable in the long-term.
When you referred to an article in the Wall Street Journal
about a putative policy of killing United and breaking it up,
that to me is mindless. The first thing that would happen if
you actually tried to kill United is that you would vitiate all
the good work that is happening now. By taking that additional
capacity out, you take the pressure off everybody else to
continue to reduce costs the way they are doing right now.
That is not a good position. United going away is not a
good solution for this industry. And it would be a horrible
solution, of course, for the thousands and thousands of people
who work for United and who are served by United. So that has
no place. I know you did not suggest that it would have any
place, but it has no place in Government policy, as we sit here
today.
Senator Bennett. It gave you the opportunity to give you
the speech you have just given.
Mr. Shane. Those are some random comments that I would have
on your remarks.
Mr. Mead. I have two quick comments.
On what you were referring to about doing a background
check on people like the U.S. Senators, you can come in here
and you do not have to go through a big hassle. And you said
that was because they know who you are and know about you.
TSA, which is now at Department of Homeland Security, is
working on what they call a smart card that, I think, is
probably about a year away. And one of the key questions is
going to be how much information do we want to know about you
before you get a smart card? Do we want to know about your
income taxes? Do we want to know about your travel? Do we want
to know who your friends are? And that is very controversial.
As Jeff said, also, the profiling, I forget what they call
it, but Lockheed Martin has a contract right now. It was issued
just before TSA went over to DHS. So I expect there will be
movement on that front.
On the price issue. I would like to come back to that.
Probably in late 2000, early 2001, the bottom was falling out
of the business market on the airlines. And that was because
the airlines had taken things too far in what they were
charging the business traveler. And one of the reasons they had
taken things too far was because people could afford it.
Dotcoms out on the West Coast, I think if you spoke to UAL,
they would tell you that dotcom travelers provided a lot of
their business travel. But dotcoms, the bottom fell out of that
market.
So I think what is happening now in the industry is they
are trying to reattract business travelers, but they are also
trying to do so at a substantially lower fare. And I suspect,
sir, in time that is going to work.
CAPACITY BUILDING
Ms. Blakey. I would like to add one other point, too,
because as Ken is referring to 2000 and what happened there.
You asked what the Government can do. And I think very
importantly we have to remember that part of the phenomena of
2000 were incredible delays. The summer of 2000 was a horrific
time as a business traveler or as a traveler period. And I
think it did put a damper on things.
What we can do is increase the capacity in the system. And
as I say, staying the course on that right now, in terms of our
investment in this, I think is critically important because it
really is an appropriate role for Government.
Senator Bennett. Thank you very much. Senator Dorgan?
Senator Dorgan. Thank you very much.
Let me make a couple of observations and then ask a couple
of questions. First of all, Mr. Shane, you indicated that we
should let the market work. Let me say I am not someone who
looks at the airlines and thinks they have done nothing wrong.
I am not a big fan of the pricing schemes. You can pay twice as
much to go half as far if you want to go to North Dakota versus
Los Angeles from D.C. So I have plenty of irritation about a
number of things.
But I must say that it is not a market system that works
when an entire industry is shut down from a terrorist attack.
Shut down, every asset ordered to be grounded immediately. And
the airplanes themselves were used as the missiles, loaded with
fuel, for the attack itself. And the picture is shown on
television and all of those potential fliers are watching these
hijacked airplanes being used to destroy the passengers, and
being used to topple the skyscrapers.
There is no market system with respect to how people and
potential passengers react to that.
In addition, as we went into that September 11th terrorist
attack, we had a recession prior to it and a sputtering economy
and the economy still sputters. There is really nothing market
oriented about fuel prices and the airline industry has a heavy
burden with fuel prices and fuel prices have spiked up because
of the uncertainty of war over months and months and months and
months. There is certainly nothing market oriented about war
and what it does to people's interest in flying and concern
about flying.
There is a whole series of things that have converged at
the same intersection at the same time. And we can simply say
let us ignore this and let the market system work and behave in
that manner. But the fact is our economy will pay a heavy,
heavy price if those who counsel that while the tent collapses
we should just be interested in watching and observe how
interesting it is prevail. If they win, if that is the mindset,
in my judgment this economy will pay a heavy price.
Mr. Mead, you mentioned rural areas. We are pretty familiar
with the price that is paid for dislocation and for
discontinuance of service. We are pretty familiar with people
that talk about the market system from their enclaves in big
cities. But I must say, this is an industry that is essential
to this country's economy. It is in bigger trouble than most
anybody knows. We may see all of the major players being in
bankruptcy, some of them never coming out. The question is do
we do something or do we do nothing but observe and talk about
how interesting it is?
ADMINISTRATION'S REPRESENTATIVE
Mr. Shane, I voted for you and I said in the Commerce
Committee when you appeared before us, I think you have great
credentials. I am impressed with your background and was
pleased to vote for your nomination.
But frankly, I do not know why they sent you to this
particular hearing which, I was told, was a hearing to talk
about the financial challenges facing the aviation industry. My
colleague, Senator Murray and certainly I, having been in the
discussion yesterday in the Appropriations Committee about the
issue of what we should do, what kind of financial package we
might want to construct.
And you say well, I am not involved in all of that. And I
really cannot respond to it. I do not understand, maybe you
were not the one to come to testify on behalf of the
Administration, but somebody should be here to tell us what the
Administration thinks. What are they prepared to accept? What
are they prepared to reject? What do they think we ought to do?
So with that as a prelude, let me just ask the question,
Mr. Shane. And I do not mean this in a personal way to you. But
you were responding repeatedly to Senator Murray, ``Look, I am
not involved. I do not know.''
Frankly, this hearing, it seems to me, needs to be
represented by someone in the Administration that says here is
what we think we ought to do at this point. And we might
disagree with that and we can have a discussion about it, but
we need somebody to say what the Administration's plan is and
what they will accept? Can you respond to that?
Mr. Shane. I think you do need somebody who can respond to
those questions. Whether a hearing of this sort is the
appropriate forum for having that discussion, or whether there
is some more effective forum where you can have that discussion
is an open question in my mind.
I was invited to come here and testify and I showed up and
the original billing was that we were going to be talking about
the FAA budget.
Senator Dorgan. Then we have a different understanding
because my heading on this says it was to be a hearing on
aviation safety and security and financial challenges facing
the industry.
Mr. Shane. That is correct, and we did learn that well in
advance of the hearing. I am not faulting the committee for not
telling us what the hearing was going to be about, far be it
from me. But we did not know, when we began planning for the
hearing, that there would be votes in both houses yesterday. We
could not respond that quickly for purposes of this hearing
with that sort of information.
GOVERNMENT INTERVENTION
If I could only add one more point, Senator, what you said
about the market not working when there was a terrorist attack
on the United States, I do not disagree with anything you said.
Of course, the market was not working then and we had a
compensation program put in place and we created an Air
Transportation Stabilization Board because of that. And we had
a whole program of assistance to the airline industry at that
time. And I agree with you that a war obviously compromises the
effectiveness of market forces.
No question about that. We are not arguing about whether
there should or should not be assistance. We are just arguing
about how much is consistent with the ideal of a restructuring
of this industry for the future. That is the only issue.
Senator Dorgan. But you know, what I observe is folks in
the Administration just watching all of this. I do not see that
the Administration has developed an aggressive, robust plan.
And frankly, while Senator Murray is trying to apply a
patch to this--and I support that, and I think she did a
remarkable job yesterday in the Appropriations Committee--I
frankly think it is not enough. I know what she is doing. She
is trying to do the best she can to get something put in this
supplemental bill, and she did that yesterday to add to what
was in the bill.
But frankly, I think if we do not think in a bit longer
term here with respect to this industry about the consequences
of having a substantial portion of it just completely collapse,
I think we do this country a great disservice.
And the question is, is that sort of thing going on in the
Administration? If so, where? Who is involved? And who can we
call up here to talk to about it?
Mr. Shane. Yes, it is going on in the Administration. If
you are talking about the in extremis situation where we are
looking at what you might even consider to be a disorderly
liquidation of a number of airlines, yes, we are considering
the ramifications of that and attempting to plan for it.
Senator Dorgan. What is the worst case that you see? You
talk about the disorderly dissolution.
Mr. Shane. Well, a worst case scenario is probably
something we should not discuss in an open hearing, to be quite
honest with you. We are talking about a variety of scenarios
that I think none of us wants to think about out loud. And I
would be happy to come and visit you in your office and talk
about that at greater length.
But to suggest that the Administration is not focused on
those issues as a major priority would be a complete injustice.
We do not go into all of that in great detail in public fora
like this, but plenty is going on.
The main point, however, is that there is a process
happening within the industry that does appear to be producing
some success. And the USAirways success story is a prime
example. And the Congress can take credit for that. You set up
the Air Transportation Stabilization Board (ATSB). They
qualified for a $900 million loan guarantee but only if they
made certain cost savings in the structure of their company,
which they then did.
So the ATSB created the incentive, and the Congress also
created the incentive for USAirways to do what it did. And
USAirways now has probably a very long lease on life. We can
all be proud of that.
Those are the kinds of things that we support. There was
never any argument about whether we should do the ATSB program.
Senator Dorgan. Let me just say, in response to my
colleague Senator Bennett, who I have great regard for, I think
there are some examples of successes. In fact, there are a
couple of carriers that are, at the moment, profitable. But in
most cases, those successes are point-to-point carriers that
have picked certain explicit markets and said those are the
markets that we are going to serve, and only those markets
because those are the markets in which we think we can make
some profit.
Carriers that have a broader reach and serve some smaller
areas react kind of viscerally to this question of the market
system. I think the market system is really, really wonderful,
I mean really terrific. The market system, however, needs a
referee from time to time.
And so, with respect to aviation and commercial airline
service specifically, I am very concerned that we maintain a
network of providers and that we not sit back and say let us
allow dissolution to occur, despite the fact that we have had
an intersection of the most unusual events perhaps in a
century, the convergence of severe economic stress, a war, fuel
prices ratcheting way up, and a terrorist attack using
airplanes. We have not seen that since we began flying with a
network of air carriers.
That is what I think Senator Murray was talking about
yesterday and it is my great concern. I do not think this
industry is going to come out of this whole or in any way in a
manner that serves all of our country, unless we develop a
strategy. Some call it industrial policy. Well, maybe it is.
But nonetheless, a strategy of some sort that says this is a
very serious, unique problem and we need to address it.
That is why I believe Senator Murray's amendment, and
Senator Stevens' as well, is a start. But I think it is short
of perhaps what we are going to need to do in a very aggressive
way in the future.
Let me just conclude by saying I had intended to ask
questions of Administrator Blakey, and thanks for your service
down there, and I will send some questions in writing, if you
do not mind.
Ms. Blakey. I would be delighted.
Senator Dorgan. Mr. Mead, thanks for your continued work.
You have appeared before not only this committee, but the
Commerce Committee, and I think your work has been
extraordinarily helpful to us.
Mr. Shane, again, I did not mean it in a pejorative way.
Thanks for coming down. But I really think we need to know a
lot about what is being done and what is being considered in
the Administration because there has to be a partnership in
terms of how we address these issues.
Mr. Shane. Senator, thank you for your vote.
Senator Dorgan. For confirmation?
Mr. Shane. Yes.
Senator Dorgan. I would still vote that way.
ADMINISTRATION'S POSITION ON AIRLINE AID
Senator Murray. Mr. Chairman, can I just follow up on
Senator Dorgan, just to ask Mr. Shane, and it is frustrating
because we hear Secretary Mineta in the papers say that we are
far apart. But unless you talk to us and tell us what your plan
is and what you think is reasonable, it is hard for us to know
where to go.
My question, just following up on Senator Dorgan, is you
had talked about the Administration negotiating. I just want to
know who they are negotiating with. The Senate Democrats added
$700 million yesterday. No one is talking to us. Are they
talking to someone representing the unemployed workers? Are
they talking to the airports? Are they just talking to the
airlines? Or are they just talking to themselves?
Mr. Shane. I thought they were talking to congressional
leadership and I cannot be more specific than that. I thought
it was being done in White House Legislative Affairs and in the
normal way in which----
Senator Murray. So you know, if you could pass it back to
them, we are not hearing from anybody. And I do think they need
to talk to the airports and to the unemployed workers, as well.
Mr. Shane. Thank you.
Senator Shelby. Some of these questions I am getting to may
have been asked. I had to go to a press conference, and I
apologize.
I hope we will never pursue ``an industrial policy'' but I
understand how important the airlines are to our travel, to our
way of life, and to our commerce. We all do. It is a question
of how we make it work for all of us.
Industrial policy troubles a lot of people, including this
senator.
Madame Administrator, if you could focus----
Senator Dorgan. Mr. Chairman, let me amend that. I did say
industrial policy. Let me just say cogent policy.
Senator Shelby. A well thought out policy.
Senator Dorgan. Yes, well thought out policy.
Senator Shelby. I am sure we will work on that.
MOST IMPORTANT AIR TRAFFIC CONTROL PROJECTS
Madame Administrator, if you could focus on only three air
traffic control modernization projects, which three projects in
your judgment are the most important to the future of the
aviation system and why?
Ms. Blakey. That is a good question. I think the first
thing I would call your attention to, in terms--and we are
talking technology here, rather than procedures; is that
correct?
In terms of technology, I would have to tell you that the
most urgent thing is modernizing the Host computer system, if
we will, that really is the heart and brains of the air traffic
control system. This is the En Route System and there is a new
procurement, a research and acquisition program on, called En
Route Automation Modernization (ERAM), which we are at the
beginning of. It is a very expensive one. I certainly would let
the committee know that we understand that we are talking about
something that is a major taxpayer's investment.
Senator Shelby. Huge.
Ms. Blakey. Yes, huge. The word huge is quite right.
But what we have to realize is we have a 30-year-old system
now--30 years. The language that that system is written in, the
software for it, is called Jovial. Now how many among us know
anyone who even knows what Jovial is, much less can write it? I
am told there are six people in the country at the moment.
So it is not hackable. That is the good news. But it is on
life support. It is still safe, but we are at the very end of
the life of this system. And we can, if we stay on track with
this new research and procurement program. That is number one.
The STARS program. I know again, this committee and others
have had to sweat bullets over STARS because again it is a very
expensive program. It had a lot of inflation in its cost, and
was rebaselined.
I had the best meeting I have had since I got to the FAA
just the other day on STARS, because I will tell you what we
are finding out. We have deployed the system in Philadelphia
and not only is it working, it is working very well for air
traffic controllers, the airlines, and our maintenance
workforce. It is going beautifully.
And we believe that what we are seeing is that rather than
the heavy costs that we had expected, in terms of deploying
system after system, a lot of those costs, I think, were
absorbed in the early stages of development. As we roll it out
it will not require as much customization. It will not require
as many development dollars, if you will.
Senator Shelby. Are you telling us it is going to be under
budget?
Ms. Blakey. No, I am not.
Senator Shelby. As appropriators, we have been waiting to
hear some very good news.
Ms. Blakey. Well, listen, I will tell you, I am looking for
some really good news in the area you are focusing on. Needless
to say, it is one of the areas that keeps me awake at night.
But the fact of the matter is, I think we are going to have,
and I would be delighted to get together with the committee on
this, some good news on that ongoing rollout on STARS as we go
forward. So those two I would call your attention to.
I would also call your attention to the fixed-price
contract that we have for the Oceanic Aerospace. Again, that
contract is going forward and it is staying within the fixed
cost that we have anticipated. And that is something that is
supported.
And may I finally give you one other piece, because we all
like good news. Our WAAS, this is the Wide Area Augmentation
System, is providing a lot of support in terms of guidance for
smaller airports in particular. It is important to our general
aviation community for vertical guidance.
That is going to come in early. We are going to turn it on
this summer. And we are discovering again, we got some
efficiencies through computer modeling. Rather than having to
fly every approach for 530-some-odd airports we are going to
roll it out for, we are able to do that on a sampling basis and
model the rest of them and save some real money and get it
online quicker. So that is going well. It costs a lot
initially, but I think you are going to see that it is going to
be a great asset in the system.
AIP AND SECURITY RELATED FUNDING
Senator Shelby. Thank you. More than $560 million in AIP
funding was used for security related expenses in 2002, which
was up from only $57 million the previous year. Recently TSA
Undersecretary James Loy testified that TSA would like to have
``one more bite at the apple'' this year to use AIP for high
priority security purposes.
Is the FAA contemplating spending fiscal year 2003 AIP
funds for installation of explosive detection equipment at
airports? And if so, how much does the Administration propose
using?
Ms. Blakey. There are massive costs for a lot of our
airports involved with installing these van-sized pieces of
equipment.
Senator Shelby. They are not cheap, are they?
Ms. Blakey. They are not cheap at all, I will tell you. In
fact, for some of our airports it is over $200 million. So the
short answer is yes, because I think we have to. What I would
caution the committee about is this, we have said that
certainly we can sustain another bite at the apple of about the
same size bite as last year.
Senator Shelby. Not the whole apple, though.
Ms. Blakey. Not the whole apple, and over the long run we
will eat it to the core in terms of maintenance, safety,
enhancing capacity. So for out years, I think you have to pay
attention to that.
Senator Shelby. What effect would the use of AIP at 2002
levels, or even higher levels, have on other important safety,
service improvement, or noise related projects in 2003?
Ms. Blakey. AIP is a critical program in terms of both the
kinds of issues you just highlighted and certainly in terms of
noise. I am happy to say that the way the AIP funds work right
now, we are able to substantially mitigate the effect on our
citizens, 14,000 of them every year through AIP on the noise
front.
We are also going to use some of those funds for emissions,
issues of air quality. I have to tell you, I am very pleased
that the reauthorization that we are putting before you all is
very aggressive on the environmental front, both in terms of
using those funds well and wisely for that, and also in terms
of streamlining so we do not drag these projects out the way we
have.
In terms of capacity, I mentioned earlier some of the
airports we are bringing online. One thing I would tell you is
this, while these great big runway projects, Chicago, Denver,
pick one of them, but we are talking, in some cases, over a
billion dollars for these runways, are supported significantly
through passenger facility charges.
For the smaller airports AIP money makes all the
difference. And so we would like to see a greater percentage of
AIP money going to smaller airports because they really cannot
raise the money in other ways the way the big airports can.
So I would say on the capacity and safety front, that is
important and I would urge your attention on that.
Senator Shelby. Mr. Shane, what would be the long-term
impact on using AIP funding at these levels for security
purposes.
Mr. Shane. As the Administrator hinted, I think we really
begin to take a great big bite out of our ability to grow
capacity. And we have to grow capacity, even in this
environment. If we stop growing capacity, as the Administrator
said in her earlier remarks, we will be losing an enormous
opportunity. We will have the summer of 2000 again. We will
have it in the summer of 2004 or 2005. And we will not have a
very good excuse for it. It is just terribly important to
maintain AIP for capacity growth purposes.
CONTROLLER-IN-CHARGE PROGRAM AND OPERATIONAL ERRORS
Senator Shelby. Mr. Mead, has expanded controller-in-charge
programs had any impact on operational errors?
Mr. Mead. We cannot say for sure that it has. We can say
that there is a statistical correlation. What you need to watch
in this controller-in-charge program is in order to move out
some supervisors, FAA would designate the elite controllers,
the best performing ones as in charge.
What has evolved at some facilities, in some large
facilities, is the FAA has designated about 100 percent of the
controllers as in charge, controllers-in-charge. I do not think
they need that many supervisors.
In some of these facilities we have seen a statistical
correlation between the program and operational errors but I
would stop short of saying it was cause and effect
relationship.
AIP SPENDING
May I respond to your question on the AIP? I would put the
brakes on spending AIP money until you had a firm idea of how
much the Administration thought it needed to overhaul, to
install these SUV-sized machines and where. And that you get
from FAA a list with some granularity of what your near-term,
big safety capacity projects are.
Senator Shelby. Senator Murray.
Senator Murray. Thank you, Mr. Chairman.
STARS AND OTHER PROGRAMS' COST GROWTH
Mr. Mead, you heard Ms. Blakey a few minutes ago talk about
the STARS program, a fairly rosy scenario, which was
interesting. I have heard you be very critical in the past. And
I wondered if you could let us know are you feeling better
about where it is moving, or do you still have concerns?
Mr. Mead. I am certainly feeling better about Philadelphia.
Actually before Administrator Blakey and I have talked at
length about STARS. I think every one of our concerns, about
how it was going to work, the technical problems and so forth,
Administrator Blakey set forth to address them. And they were
addressed in Philadelphia. And Philadelphia went online.
That being said, I am very concerned about the cost of this
program. It has gone from $800 million to $900 million. Now we
are telling people it is about $1.6 billion. I would be
surprised if you can deliver the bacon on that.
I am concerned about when you take the four or five big
acquisitions at FAA, which include the WAAS and STARS, when you
add up all that cost growth, I can hand you the equivalent of
one full year's appropriation. That has a cascading effect on
other meritorious projects that you cannot undertake. It is
going to affect our ability to achieve the vision that both
Administrator Blakey and Jeff Shane were speaking about.
Ms. Blakey. Let me also just mention one thing, if I might,
on the cost growth issue. I think one of the things we have to
do, and I am addressing this at the FAA largely, but I think
the industry and everyone has to accept this approach. And that
is that we cannot keep adding to the requirements. We cannot
keep shifting what these systems are intended to do without
accepting the fact that it then costs a lot more money.
One of the things we are trying to do is develop real
discipline, as well as bring them to the forefront more
quickly, so that this issue of accretion of new and different
changing requirements does not just completely knock a hole in
the budget.
REPAIR STATIONS
Senator Murray. Thank you. I know the chairman wants to
conclude here and I have a question I wanted to come back to
because I heard Mr. Mead talking about repair stations and
oversight of repair stations and that air carriers are
outsourcing as much as, I think it is 47 percent of their total
maintenance costs.
Ms. Blakey, if you could just tell us whether you think
your safety personnel are providing the same level of scrutiny
to contract repair stations as they are providing to air
carrier's in-house maintenance facilities?
Ms. Blakey. We are very aware of this phenomena of the
increase in contractor repair stations both here and abroad. It
is certainly a subject for our focus. We have a very rigorous
regime of inspections, as well as requirements for the air
carriers themselves to maintain a very diligent oversight. And
when it is abroad, for our corresponding civil aviation
authorities to do the same thing.
Senator Murray. I think I heard Mr. Mead say that the
foreign repair stations, some of them are not inspected at all;
is that correct?
Mr. Mead. Yes, that is correct. It is delegated to the
foreign equivalent of the FAA, in some cases.
Senator Murray. Especially when we are in an era of
worrying about terrorist attacks and those kinds of things, are
you going to be increasing the number of inspections for our
foreign repair stations? Or how are you going to deal with
that?
Ms. Blakey. We have a strong regime right now of
inspections on foreign, and they are required also to have a
renewal of their certificate every 12 months to 24 months.
Senator Murray. Does that require an on-site inspection for
foreign stations?
Ms. Blakey. Yes, from the FAA standpoint, we do require
that.
Senator Murray. So every 12 months, you are inspecting
foreign stations?
Ms. Blakey. Every 12 to 24 months. It is in that range. It
depends on the level of service and what the specifics are with
that repair station.
Let me assure you of this, though. I realize this is an
area of great concern. This is something again, there is a
phenomena of increasing usage of this. And this is certainly
something that at the FAA we are going to pay increased
attention to in a number of ways. So I would be very pleased
also to get back with you on some specifics.
Senator Murray. I would really like you to do this,
especially in this era. I think we really need to pay attention
to that. And if we are contracting more out, I think we need to
really be watching. I would like to hear more from you.
[The information follows:]
FAA's Oversight of Foreign Repair Stations
FAA assigns a principal maintenance inspector and, depending on the
size of the facility, additional staff to provide regular oversight and
inspection of repair stations located in the United States or abroad.
The standards that repair stations have to meet remain the same
regardless of whether the repair station is a domestic facility located
within the United States or a foreign repair station located outside
the United States.
The National Flight Standards Work Program requires a facility
inspection at least once a year on all repair stations. Additional
inspections may be required for various reasons, including changes in
the internal workforce composition, NTSB recommendations, or aircraft
accidents.
In addition, if a repair station performs maintenance for an
airline it must follow the airline's approved maintenance program. An
FAA principal maintenance inspector assigned to the airline inspects
the repair station to determine that the proper maintenance procedures
are followed.
When an applicant applies for FAA certification as a foreign repair
station, the FAA must first determine if a U.S. repair station
certificate is necessary to maintain or alter U.S.-registered/operated
aircraft and/or aeronautical products at the applicant's proposed
location. If the certificate is found to be necessary, and is granted,
the foreign repair station is required to apply for certificate renewal
every 12-24 months, as appropriate. If a foreign repair station no
longer maintains U.S. aircraft or components, the certificate may not
be renewed or the FAA limits the repair station's capabilities to only
those articles used on U.S. aircraft. FAA is not obligated to renew a
foreign repair station certificate.
The regulations do not require FAA to justify or provide cause for
not renewing foreign certificates. Foreign repair stations are well
aware of this, which is reflected in their certificate revocation
rates. There were 11 violations filed against foreign repair stations
in 2002 and no violations so far this year. For the last 8 years, the
average number of violations for foreign repair stations (out of the
total of enforcement filed for all repair stations) came out to be just
4.7 percent.
Finally, the airline is responsible to conduct audits of any repair
stations it uses. FAA inspectors review the results of the airline's
audits to evaluate the performance of the repair station.
For repair stations located in France, Germany and Ireland, the FAA
has negotiated bilateral agreements that allow the civil aviation
authorities in those countries to provide oversight of 173 foreign
repair stations on our behalf. FAA provides similar oversight to 1,159
of the 4,571 domestic repair stations located in the United States that
have been approved by the Joint Airworthiness Authorities of Europe.
Mr. Mead. One of the interesting dimensions of this is that
when an air carrier does most of its maintenance in-house, FAA
has a team that is essentially dedicated to that airline. They
know that airline's maintenance system and so forth. Once the
maintenance is done out-house, though, the jurisdiction, the
responsibility for the oversight is of a different unit.
In other words, the people that are dedicated to United
Airlines inspections by FAA, would not necessarily be the
people that check on how good the maintenance is at the repair
station where UAL planes are being maintained.
So I think FAA needs to develop a greater connectivity
between the two.
ADDITIONAL SUBCOMMITTEE QUESTIONS
Senator Murray. I appreciate that.
Mr. Chairman, I do have some other questions I will submit
for the record, since we are out of time.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Marion C. Blakey
Questions Submitted by Senator Richard C. Shelby
ENVIRONMENTAL REVIEW PROCESS FOR CAPACITY PROJECTS
Question. The FAA has made a concerted effort in recent years to
streamline the review and approval process for key capacity-related
projects. What is the status of those efforts? How have they affected
the time it takes to review key projects? Do you anticipate further
administrative improvements in this area? Do you support efforts in
Congress to make further improvements to the process?
Answer. FAA issued a Report to Congress in May 2001 reporting on
Federal environmental requirements related to the planning and approval
of airport improvement projects together with recommendations for
streamlining the environmental review process associated with those
types of projects. Six initiatives for streamlining were identified and
implemented, as outlined below.
--FAA established Environmental Impact Statement (EIS) Teams for
preparing EISs for major runway projects at large hub primary
airports. Since the Report to Congress in 2001, FAA Teams have
been working on the EISs for nine major runway projects
(Atlanta, Boston, Chicago-O'Hare, Chicago South Suburban
Airport (SSA), Cincinnati, Greensboro, Los Angeles,
Philadelphia, and San Francisco). EISs have been completed for
five of the projects (Atlanta, Boston, Greensboro, SSA-Tier I,
and Cincinnati) with the other four in various stages of EIS
preparation.
--FAA has reallocated staff to provide for five more environmental
specialist positions in the Office of Airports. With the
passage of the fiscal year 2003 Department of Transportation
and Related Agencies Appropriations Act, funding has been
provided for hiring 18 more airports environmental specialists
and 13 environmental attorneys. These additional personnel will
specifically conduct and expedite the environmental analysis
and review of airport and aviation development, so as to
maximize the capacity benefits to the National Aviation System.
FAA is implementing plans to hire qualified personnel to fill
these positions at various locations around the country.
--FAA continues to maximize the use of consultant resources to
perform more EIS tasks that can be outsourced by the FAA.
--FAA is working with the Council on Environmental Quality (CEQ) to
expand the FAA list of categorical exclusions that will be
published in revisions to FAA environmental orders. Initiatives
are being explored to provide for shortened and streamlined
EISs, as well as environmental assessments, that will also
involve CEQ and the Environmental Protection Agency (EPA).
--FAA continues to engage other Federal agencies at the beginning and
during preparation of EISs, about their environmental reviews
and permit requirements in order to avoid unnecessary delays.
Also, the FAA, and the National Association of State Aviation
Officials, has undertaken a joint review of Federal and State
environmental processes and coordination. As a result of this
partnership, opportunities have been identified for improving
ways in which Federal and individual State requirements can be
more effectively and efficiently combined and coordinated.
--FAA has developed, published (on FAA's web site) and updates (at
least twice a year) a compendium of best practices for EIS
preparation and management. The compendium of best practices
addresses practices that are the responsibility of the airport
proprietor, the EIS consultant, as well as those of the FAA.
The 2001 Report to Congress noted that the average time for
completion of an EIS (from start of the EIS until EIS approval) was 3
years. The average time to issue an agency Record of Decision (ROD) was
3 months. Looking at data available for four of the five runway EISs
completed since issuance of the 2001 Report to Congress, and
implementation of FAA streamlining initiatives, the Atlanta EIS took 7
months less than the 3-year average; the SSA EIS, 12 months less than
the average; and the Cincinnati EIS, just 2 months more than the
average. RODs for Atlanta, SSA, and Cincinnati were prepared and issued
in 1\1/2\, 2, and 3 months respectively. The Boston project was unique
and controversial and, therefore, the EIS process was lengthy (almost 7
years). Adding to the process was an 18-month delay between 1996 and
1998 because of a change in Massport leadership and priorities, and
extraordinary steps taken to engage community groups and the public in
the process. The Boston EIS was not a typical new runway EIS project.
In the ongoing EIS projects, FAA streamlining initiatives are being
utilized to ensure that environmental process times are minimized to
the maximum extent possible, and hiring more environmental staff will
greatly aid the effort.
FAA hopes that further agency, as well as congressional actions,
will lead to administrative improvements in streamlining the
environmental process for major runway projects around the country.
Further action taken by the FAA includes our implementation of the
environmental streamlining provisions of Presidential Executive Order
(E.O.) 13274, Environmental Stewardship and Transportation
Infrastructure Project Review. Two airport EIS projects (Philadelphia
and Los Angeles) have recently been designated as priority projects for
oversight under the E.O.
The Administration's Flight-100 bill proposes a number of
streamlining provisions including:
--Designating aviation congestion projects and aviation safety
projects for high priority coordinated, concurrent reviews;
--Concurrent reviews will be through newly-established Interagency
Environmental Impact Statement (EIS) teams;
--Interagency EIS teams are directed to establish milestones, and
responsible Federal agencies are directed to give these
projects the highest priority within their own agencies;
--Interagency EIS teams will defer to the Secretary on project
purpose and need, and on determining reasonable alternatives,
aviation factors, and aviation noise and emission analyses;
--Noise mitigation for capacity enhancement airport expansion may be
funded from the noise set-aside without an additional Part 150
process requirement, and FAA may commit in the EIS Record of
Decision to changes in flight procedures to minimize noise
impacts due to the capacity enhancement project;
--Airport sponsors are permitted to fund additional FAA staff to
facilitate timely processing of the environmental actions for
the airport's capacity enhancement project.
OCEANIC AIR TRAFFIC
Question. The FAA has a long history of problems in attempting to
provide new air traffic control equipment to manage oceanic air
traffic. Since 1995, FAA has spent more than $290 million but has yet
to deliver a new oceanic system.
Answer. Since 1995, the FAA has delivered incremental oceanic air
traffic improvements and capabilities, required to keep pace with
international standards:
--Two way controller/high frequency radio operator ``email''
automatically updating the controllers' flight data processor,
followed by high frequency radio operator voice relay to pilot
via conventional radio transmission, 1995.
--Two way controller/pilot direct ``email'' via satellite data link
operational prototype, 1995.
--Interim Situation Display which automatically updates and displays
tracking aircraft positions, 1997.
--Reduced Vertical Separation Minima allowing more planes to fly
preferred routes with increased numbers of flights, 1997.
--Conflict probe which provides an automatic or controller initiated
conflict prediction tool, 1997.
--Automated ``email'' transfer of flight data between international
flight information regions, 1997.
--Two way controller/pilot direct ``email'' via satellite data link
in all Oceanic sectors, 1999.
--Host & Oceanic Computer System Replacement, replaced aging hardware
with Year 2000 compliant computers supporting Oceanic air
traffic control communications, 1999.
--MicroEARTS, as the platform for the Capstone program, provides
surveillance data directly to airlines, allowing them to track
aircraft in flight, 2002.
FAA led the way in implementing reduced vertical separation
standards in the Pacific and followed suit with our partners in the
Atlantic. Further separation reductions require a fully integrated,
modernized system and its accompanying procedures.
In March 2000 the FAA initiated the Advanced Technologies and
Oceanic Procedures (ATOP) program to take advantage of technology
developed for the international marketplace. After conducting a robust,
global competition, the FAA awarded the ATOP contract to Lockheed
Martin in June 2001. Program costs are within the Acquisition Program
Baseline budget, approved in May 2001 by FAA's Joint Resources Council.
Question. The schedule of the current effort, the Advanced
Technologies and Oceanic Procedures (ATOP) is significantly behind
schedule.
Answer. The FAA's Acquisition Program Baseline schedule for the
ATOP program calls for initial operational capability at Oakland in
June 2004. The program is operating within its baseline schedule.
Question. What problems are the FAA experiencing with this
acquisition program and what corrective measures are you taking?
Answer. Lockheed Martin Air Traffic Management (ATM) underestimated
the amount of source lines of code and the amount of modification
needed to its existing commercial system. In March 2003, an independent
assessment team concluded that the job is larger than expected, and
will take longer to complete. The fixed price contract ensures that the
cost of developmental delay is borne by the vendor.
Installation of ATOP hardware is on schedule at the New York,
Oakland and Anchorage centers. The FAA continues to prepare for system
test, operational training, and site acceptance test activities.
Question. When can we expect a new system for oceanic air traffic?
Answer. Initial operational capability at Oakland Air Route Traffic
Control Center (ARTCC) is expected by June 2004.
OPERATIONAL ERRORS AND RUNWAY INCURSIONS
Question. What progress has FAA made in reducing the number of
operational errors and runway incursions?
Answer. FAA has achieved an 11 percent reduction in operational
errors, following 4 years of steady increases. Operational errors
declined from 1,194 in fiscal year 2001 to 1,061 in fiscal year 2002.
FAA continues to address operational errors within the National
Airspace System. Several initiatives have been developed and
implemented in an effort to increase management focus on operational
errors in areas such as communications, position relief briefings and
operational focus. The FAA deployed an enhanced terminal radar replay
tool, updated quality assurance training provided by the FAA Academy,
produced and distributed a training video on communication errors, and
conducted more than 30 special evaluations focusing on operational
errors. A 3-year operational error reduction plan has been implemented
and represents a collaborative approach to the reduction of operational
errors.
Runway incursions have declined from 407 in fiscal year 2001 to 338
in fiscal year 2002, due in part to FAA's aggressive actions to reduce
these incidents. FAA established a system to categorize runway
incursions by severity risk and has reduced the number of close calls
(those runway incursions in the two highest categories) from 53 in
fiscal year 2001 to 37 in fiscal year 2002 and 18 to date in fiscal
year 2003 (through April).
FAA plans to continue its aggressive actions in reducing runway
incursions by continued training of pilots in situational awareness
while on the airport surface, and the use of existing and new
technologies to warn pilots and controllers of potential incidents.
WAKE TURBULENCE RESEARCH
Question. In the last 2 fiscal years, FAA has requested $1 million
for the wake turbulence research program. Congress recognized that the
wake turbulence standards must be reassessed in a data-driven research
program to address important capacity and safety issues, and enacted $4
million in fiscal year 2002 and $8 million in fiscal year 2003, to
accelerate this important research. By proposing to zero-fund this
program in fiscal year 2004, FAA has ignored the need for this research
and has disregarded Congress' obvious intent to have an adequately
funded wake research program. Why has FAA failed to provide funding for
this important research program? What are the specific plans for the
FAA to rectify this problem and accordingly revise its fiscal year 2004
request?
Answer. The FAA will complete the Joint FAA/NASA Wake Turbulence
Research Management Plan and the Investment Package for the near and
mid-term wake research activities within the next few months. FAA has
no plans to revise its fiscal year 2004 request, but will reexamine the
program in future years.
COST ACCOUNTING SYSTEM
Question. What is the current status of the cost accounting and
labor distribution systems and when can we expect the full
implementation of these systems?
Answer. Cost accounting has been implemented in 80 percent of the
agency to date. Managers are beginning to use the Cost Accounting
System (CAS) data. For example, the Air Traffic Services organization
has used CAS data to target and track initiatives to reduce field
maintenance by 3.5 percent, reduce overhead costs by 4 percent, and
hold costs in Oceanic and Flight Services constant.
Implementation of the cost accounting/labor distribution reporting
system will be completed in fiscal year 2004. CAS is now in place in
Air Traffic Services, Commercial Space Transportation, Financial
Services/CFO, Human Resource Management, Free Flight, and the Academy
and Logistics Center at the Mike Monroney Aeronautical Center. In
fiscal year 2004, CAS will be implemented in Research and Acquisitions,
Airports, and Regulation and Certification.
AEROSPACE COMMISSION
Question. The Commission on the Future of the United States
Aerospace Industry issued a report making a number of recommendations
to ensure the competitiveness of the American industry. One of the
Commission's recommendations called for the Federal Government to
establish a national aerospace policy and promote aerospace by creating
a government-wide management structure. How is the FAA responding?
Answer. FAA formed a Joint Planning Office (JPO) comprised of
Federal Aviation Administration (FAA), Department of Defense,
Transportation Security Administration, Department of Commerce and
National Aeronautics and Space Administration, to focus on development
of the next generation air traffic management system. FAA leads the
team. The Agency is also establishing a high-level policy committee to
guide this effort. It will be chaired by the Secretary of
Transportation, and will be established this summer. The next steps are
to establish advisory committees for this activity, to coordinate a
framework for the initiative through the five participating agencies
and departments, and begin drafting the national plan.
______
Questions Submitted by Senator Patty Murray
CHIEF OPERATING OFFICER
Question. Will the FAA ever have a Chief Operating Officer?
Administrator Blakey, at previous FAA hearings in this
subcommittee, it has been noted that the FAA has yet to appoint a Chief
Operating Officer for the agency. This position, as you well know, was
created in AIR-21 and is considered critical to moving air traffic
control into a more performance-based operation. The COO position has
never been filled. Your reauthorization proposal modifies the
responsibilities of the Chief Operating Officer to clarify that the
position will focus on the day-to-day operational functions of the air
traffic control organization.
Why do you think these changes will improve your chances of
recruiting a Chief Operating Officer?
Answer. While the changes proposed are modest, the FAA and the
executive search firm believe that clarifying the role of Chief
Operating Officer (COO) is key to the successful recruitment for the
position.
Question. What can you tell us about your efforts to recruit a COO
so far, specifically how many serious candidates have you considered?
Answer. With the help of Korn-Ferry International, there was a
search conducted earlier this year. The Administrator and Deputy
Administrator have interviewed several of the top candidates.
Discussions are ongoing.
CONTROLLER RETIREMENTS
Question. Ms. Blakey, over 50 percent of the controller workforce
will be eligible to retire by the year 2010 and the General Accounting
Office has estimated that roughly 5,000 controllers plan to leave the
FAA by the end of fiscal year 2006. Your budget requests funding for
only 302 additional air traffic controllers. Based on this request, I'm
concerned that the agency isn't adequately preparing for the surge in
controller retirements.
Given that it takes as much as 5 years to train a new employee to
become a fully certified controller and assuming that the GAO's
estimates are correct, shouldn't we be concerned that safety or the air
traffic control system's operational capabilities might be compromised?
Answer. Staffing standards have been revised based on recent
traffic forecasts. These standards are an important element, along with
projected retirement losses, to predicting future controller
requirements and hiring needs.
With the drop in staffing requirements due to reductions in air
traffic, the 302 additional positions in the fiscal year 2004 budget,
and the FAA's hiring plans for future years, the agency is positioned
to meet all of its staffing needs.
The agency is sensitive to the additional hiring needs that are
needed to address the surge in retirements. The FAA's annual retirement
projections have been very accurate, and the FAA has been meeting its
annual hiring goals. Over the last 6 years, the agency has hired more
than 3,000 new controllers.
AVIATION TRUST FUND REDUCTIONS
Question. Ms. Blakey, the Inspector General's testimony states that
over the next 4 years, Aviation Trust Fund tax revenues are expected to
be about $10 billion less than projections made in April, 2001. He also
stated that the options for compensating for these declines--whether it
is increasing excise taxes, limiting investment in the aviation system,
or relying more heavily on General Funds--are not attractive.
Ms. Blakey, in order of preference, how do you think we should
bridge the gap between declining trust fund revenues and the FAA's
budgetary needs? Should we raise excise taxes, defer investments in air
traffic control modernization or contribute more General Funds?
Answer. Just as a healthy industry is important to FAA's mission,
FAA is important to a healthy industry. By virtue of its mission to
regulate and promote the U.S. aviation industry, the FAA plays a vital
role in sustaining the health of this critical section of the U.S.
economy. The recent economic hardships experienced by the industry have
caused the FAA to refocus on how its programs affect the industry, and
particular, on what actions it might take to help improve the serious
conditions facing the industry.
The FAA must continually endeavor to make its own operations more
efficient and responsive to the needs of industry and the public,
particularly in a time of tighter Federal budgets. Areas where the FAA
is investigating possible improvements are procurement activities,
staffing requirements, organizational structure, and enhancements to
our financial systems--DELPHI, Cost Accounting (CAS), and Labor
Distribution Reporting (LDR). Potential benefits include the ability to
respond more efficiently, quickly, and cost effectively to the needs of
industry and the public.
The Airport and Airway Trust Fund is the principal source of
funding for FAA programs, accounting for all capital program funding.
In fiscal year 2004 approximately 79 percent of operations funding will
be derived from the Trust Fund. FAA remains committed to using the
Aviation Trust Fund only to fund the Department's aviation programs,
but in a change from AIR-21, the Agency is proposing to increase the
use of balances that have built up in the Trust Fund. In fiscal year
2004, FAA would use $12.4 billion of trust fund dollars and $1.6
billion from the General Fund.
CARRIER SAFETY OVERSIGHT
Question. What specific measures has your safety inspection
workforce taken to ensure that the air carriers aren't shortchanging
critical maintenance needs? For example, how does the frequency and
intensity of your on-site inspections of financially-distressed
carriers differ from those conducted on financially stable carriers?
Answer. In addition to monitoring an air carrier's regulatory
compliance, FAA inspectors are constantly monitoring their carriers'
financial and labor relations circumstances so they have a complete
picture of the airline's status. When inspectors see indicators of
financial trouble, the inspectors increase their interaction with the
airline's management and adjust their surveillance plan to increase
their focus on areas that might be at risk due to financial cutbacks.
Each carrier's experience is different and requires that the
surveillance plan be tailored to the circumstances. As a carrier
reduces its schedule, its fleet, and its employee ranks, the impacts of
these reductions must be constantly evaluated and surveillance plans
amended. Areas of adjusted surveillance would include: training to
ensure employees who are reassigned are properly prepared for their
assignments; maintenance to ensure that discrepancies reported by
pilots are properly addressed; and other areas affected by the
carrier's plans.
The carrier's quality assurance and quality control process are
monitored to ensure they are being followed and that findings are being
addressed. Data and trends--such as dispatch reliability, on time
performance, and minimum equipment list deferrals--are monitored and
surveillance is retargeted if the data indicates a negative trend.
OVERSIGHT OF FOREIGN AND DOMESTIC REPAIR STATIONS
Question. Please provide us specific detail as to how the FAA
intends to increase its oversight of foreign and domestic repair
stations in terms of frequency of inspections and safety audit
requirements?
Answer. Currently, the FAA is looking at a new model for
Certificate Management Oversight of Part 145 repair stations. The model
is designed to mirror that of a major air carrier Certificate
Management Unit, and has already been put in place to provide oversight
for a major repair station in the Seattle area. The FAA has increased
the inspectors assigned to oversee this station from 1 to 5.
Under this model, the Certificate Management Unit is able to
identify possible deficiencies in the repair station's organizational
structure, quality control procedures and repair stations' manual. This
enables the repair station to make needed changes to the organization
and procedures to mitigate and/or eliminate known risks.
STATUS OF THE ASR-11 RADAR AND STARS
Question. Have all the software problems now been resolved with
this radar and has your testing of the radar uncovered any additional
performance concerns that would delay its implementation or increase
its costs further?
Answer. Yes, all software problems associated with the ASR-11 radar
have been resolved. Results of testing have proven the system suitable
for operational use, as is the case for the Willow Grove ASR-11, which
currently feeds the Philadelphia STARS.
FAA does not foresee any performance issues that would delay
implementation of ASR-11, although some sites may present a challenge
to obtain optimum performance. In these unique situations, as with any
radar, additional measures (e.g. extra adjustments/enhancements) may
need to be considered.
ASR-11 is a joint FAA and Department of Defense (DOD) procurement
program intended to replace aging Airport Surveillance Radar Models 7
and 8, which are nearing the end of their service life and becoming
more difficult to maintain. The ASR-11 system is an integrated system
that includes a primary radar system and associated beacon system. The
ASR-11 will provide digital radar input to new automation systems such
as Standard Terminal Automation Replacement System (STARS).
Question. Since the full deployment of STARS is dependent upon the
ASR-11 to provide the digital radar feed, how confident are you that
STARS will stay on schedule?
Answer. FAA has developed a deployment plan and budget for STARS
which is currently being validated by an independent third party. The
waterfall schedule has been coordinated with the ASR-11 team to ensure
synchronization as much as possible. FAA will continue to coordinate
both program schedules throughout the deployment of both STARS and ASR-
11. In the event of a delay to the ASR-11 schedule, several radar
digitizers have been purchased which can be used in place of the ASR-11
until the two programs line up.
STARS is a joint FAA and Department of Defense (DOD) procurement
program intended to replace the aging Automated Radar Terminal System
(ARTS) at FAA TRACONs and DOD terminal facilities. STARS will work in
conjunction with digital radar systems to allow air traffic controllers
to track aircraft within the terminal area. The new equipment and
software will be based on a digital platform and provide higher-
resolution screens with color capabilities and higher system
reliability. STARS can also be expanded to meet increased traffic
demands and accommodate new automation functions.
REVISION OF THE OPERATIONAL EVOLUTION PLAN
Question. Ms. Blakey, the Operational Evolution Plan (OEP) was
unveiled just 3 months prior to the tragic events of September 11. The
OEP was expected to be the FAA's blueprint for how to increase the
capacity and safety of our Nation's air traffic control system by 2010.
Your recently released Aviation Forecast predicts an even slower
recovery than what was estimated last year. Given the anticipated
slower recovery, how has the OEP changed--what specific programs have
been modified, deferred or expedited?
Answer. There is no doubt that the timelines for the Operational
Evolution Plan have been impacted by the events of September 11 and by
the subsequent downturn in the airline industry. Airlines have had to
deal with their own financial issues as well as additional costs for
security. As a result, they have not been able to maintain the level of
investment they had hoped for in OEP improvements.
The most recent update to the OEP (Version 5, published in December
2002), reflected adjustments made over the past 18 months in response
to these forces. Runways at Atlanta and Seattle were delayed and
Charlotte's runway has been deferred as a result of decisions reached
by the local community. We also scaled back activities in Miami with
the Controller Pilot Data Link because of the airlines' limitations to
voluntarily equip as originally planned. With Version 5, the OEP added
a new runway at Cleveland and Boston, four Traffic Management Advisor
(TMA) sites were added, along with several other capacity enhancing
technologies, to include required navigation performance, collaborative
decision-making, and more efficient approaches to airspace management.
Further discussions with industry will occur this summer, leading to
the next update of the OEP.
AIR TRAFFIC CONTROL AS A COMMERCIAL ACTIVITY
Question. Ms. Blakey, in February, the Department of Transportation
published their Federal Activities Inventory Reform or FAIR Act list
which changed the status of air traffic control from a governmental
activity to a commercial activity. As you well know, the National Air
Traffic Controllers Association has expressed concern that this takes
air traffic control one step closer to privatization.
Why was the classification of air traffic control changed?
Answer. On December 18, 2002, the Secretary of Transportation
determined that air traffic control is commercial and not inherently
governmental. There are two reasons: (1) Functions that are inherently
governmental involve a sovereign act on behalf of the Government or
bind the Government to a particular course of action. The separation
and control of air traffic does not meet this rigorous definition and
takes into account the FAA's existing contract tower program. (2) There
are 219 contract towers that are safely and efficiently providing air
traffic control services by private contractors. However, this was not
a step toward privatizing the air traffic control system. This is not
under consideration.
Question. Ms. Blakey, in February, the Department of Transportation
published their Federal Activities Inventory Reform or FAIR Act list
which changed the status of air traffic control from a governmental
activity to a commercial activity. As you well know, the National Air
Traffic Controllers Association has expressed concern that this takes
air traffic control one step closer to privatization.
How can you assure the committee that air traffic control will
continue to be a core mission of the FAA and that it will not be
subject to privatization?
Answer. On December 18, 2002, the Secretary of Transportation
signed a formal determination that functions involved in the separation
and control of air traffic are a core capability required for the
successful accomplishment of the FAA mission to ensure the safety and
security of the National Airspace System. Based on the Secretary's
determination, these functions are not subject to competition and will
not be contracted out. I fully support the Secretary's position.
ENVIRONMENTAL REVIEW PROCESS FOR AIRPORT PROJECTS
Question. Ms. Blakey, last October, Secretary Mineta announced a
list of seven transportation construction projects that were selected
to receive accelerated environmental reviews. The Philadelphia
International Airport runway construction project was the only airport
project that was included on that list. Why was only one airport
included in this initial list of projects selected for accelerated
environmental review?
Answer. Secretary Mineta chose the initial selection of priority
transportation projects in order to get the accelerated environmental
review process underway before completion of project nominations in
December. The Secretary, therefore, asked for project nominations by
the Modal Administrators. He considered several airport projects before
making his selection. Because the initial list of selected projects was
to be small in number, the competition was keen. As a result only one
airport project was selected.
Question. Ms. Blakey, last October, Secretary Mineta announced a
list of seven transportation construction projects that were selected
to receive accelerated environmental reviews. The Philadelphia
International Airport runway construction project was the only airport
project that was included on that list. Since that announcement, how
many other airport projects have been selected for accelerated
environmental review? Which specific airports?
Answer. Since announcing the Philadelphia Airport project, one
other airport project was selected for accelerated environmental review
under Executive Order 13274. Secretary Mineta announced the selection
of the Los Angeles World Airport project on February 27, 2003 with five
other transportation construction projects. Five other nominated
airport projects remain on the Department's project review register for
future consideration.
FAA highest priority projects for expediting or streamlining the
environmental review process continue to be those major runway projects
at large primary airports. These projects are the types that reduce
national congestion the most. FAA will continue to apply and carry out
streamlining initiatives for these projects regardless of whether such
projects are nominated or selected for review under Executive Order
13274.
AIRPORT IMPROVEMENT PROGRAM
Question. At a time when airports are struggling to pay for the
installation of explosive detection systems, what is your rationale for
keeping the Airport Improvement Program (AIP) flat while requesting
increases for FAA's other major programs?
Answer. AIP was funded at levels up to $1.95 billion prior to the
enactment of AIR-21. Post AIR-21, AIP funding increased in fiscal year
2000 to $3.2 billion, a 65 percent increase. In fiscal year 2003, AIP
funding rose to $3.4 billion. This represents a dramatic increase in
funding that the President's Budget would retain in fiscal year 2004.
Although airports face high costs associated with the deployment of
explosive detection systems, there is other Federal money available to
assist airports, specifically from the Department of Homeland Security
(DHS).
GRAPHIC ADVISORIES FOR GENERAL AVIATION PILOTS
Question. Ms. Blakey, the recently-passed 2003 Omnibus
Appropriations Bill directed the FAA to publish graphic advisories in
addition to the notice-to-airmen advisories and to make these available
to flight service stations and the aviation community via the Internet.
The increased number of special use airspace and temporary flight
restrictions subsequent to September 11, 2001, and the recent elevation
of the threat to Code Orange make it even more critical to share this
information with pilots. As yet, the FAA has not done as Congress has
directed. Why not?
Answer. The FAA web page contains a link to graphic depictions of
Temporary Flight Restrictions (TFRs). The site was activated shortly
after September 11, 2001. Except for general notices, each TFR contains
corresponding graphics.
The flight service stations (FSS) were heavily impacted by the
above event, which led to the activation of the Flight Service
Operation Support Center (FSOSC) team. The FSOSC creates graphical
depictions of TFRs, as well as plain text versions of the TFR Notice to
Airmen (NOTAM) using the TFR Operational Display System (TODS) special
version software developed by Jeppesen for FSS use. This information is
stored on the Jeppesen server and can be accessed via the Internet. At
that time, most FSSs did not have the connectivity to access this data.
The FAA has since purchased and deployed the hardware and software to
support this capability. This information will be available to the FSS,
pilots, and others on June 15, 2003.
Question. When precisely can we expect these graphics to be
available to general aviation pilots via the Internet?
Answer. Graphical Temporary Flight Restrictions (TFR) information
is currently available to pilots through one of the FAA's direct user
access terminal system (DUATS) vendors, CSC (formerly Dyncorp, Inc.).
The TFR Operational Display System (TODS) products will be made
available to the general aviation public on June 15, 2003.
SAN JUAN COUNTY'S AIRSPACE FREQUENCY
Question. What specific steps are you taking to ensure pilots
flying in San Juan County, without the assistance of any air traffic
control, will be aware of and adhere to the new frequency?
Answer. The FAA process to inform all pilots of new frequency
changes is to submit the change to the National Flight Data Center
(NFDC) in the FAA Headquarters, Washington, DC. The information is then
published in the National Flight Data Digest (NFDD), which comes out
daily. This publication is sent to subscribers of NFDD, which includes
air traffic facilities, chart producers, airlines, computer database
providers, military, etc. General aviation pilots do not normally
subscribe to the NFDD. The NFDD is used as the official authority to
incorporate the change into airmen's charts and the Airport/Facility
Directory (AFD). New charts and the AFD are published every 56 days.
Since pilots are required, under 14 Code of Federal Regulations, Part
91.103, Preflight Action, to ``become familiar with all available
information concerning (their) flight,'' they are aware of any changes
in the National Airspace System, including frequencies, as of the
effective date of these publications. Therefore, frequency changes
should coincide with charting cycles so pilots are aware of these
changes when they discard outdated charts and AFDs, and begin to use
new or updated charts and AFDs.
Additionally, many fixed-based operators will post proposed changes
to the airport and the surrounding airspace, including Common Traffic
Advisory Frequency and Unicom frequency as soon as they become aware a
change is planned.
Question. Should we hold off relinquishing the CTAF until we are
sure that pilots are educated enough to not create a safety problem?
Answer. In this case, education and notification are
interchangeable terms. The FAA recommends that notification occur via
the publication of the Airport/Facility Directory (AFD), and that the
change to the new frequency coincides with the date the new frequency
will be charted. The FAA will provide timely notification to the pilots
by ensuring that CTAF changes do not occur until the AFD and new charts
are published. Pilots are required to be aware of the AFD chart changes
and to use current publications. If the frequency change does not
coincide with the charting cycle, the FAA would then be obligated to
notify pilots through other means, such as Letter to Airmen or Notice
to Airmen. A common practice is to provide pilot notification of
changes through the AFD and charts.
AIR TRAFFIC MODERNIZATION
Question. Administrator Blakey, the Aerospace Commission
recommended making the transformation of the U.S. air transportation
system a national priority. The Commission's report specifically called
for the ``rapid deployment of a new, highly automated Air Traffic
Management system, beyond the Federal Aviation Administration's
Operational Evolution Plan, so robust that it will efficiently, safely,
and securely accommodate an evolving variety and growing number of
aerospace vehicles and civil and military operations.'' I am very
interested in seeing this recommendation implemented to ensure the
economic security of our country.
Can you tell me what your agency is doing to respond to this
recommendation?
Answer. Working with other government agencies, the FAA has
initiated an informal working group to develop a unified national air
transportation plan for 2020 and beyond. The key objectives of the plan
are to develop a series of unified strategic goals and actions that
will move the industry forward. Critical to this is an emphasis on
aligning the activities and resources of the various government
departments to support the plan.
FAA will continue to follow the blueprint laid out in the
Operational Evolution Plan (OEP) for the capacity goal. To help the
Agency in assessing the aviation system of the future, FAA had
discussions with industry representatives to explore what they believed
will be the changes and challenges to the system. FAA is considering
broadening this goal to better reflect the mobility goal of the
Department by focusing more directly on the passenger experience. In
that way, the OEP will become the jumping off point for the longer-term
national plan. The scope of the team's work will include issues related
to air traffic management, aviation safety, capacity enhancement,
airport improvement, security, and homeland security.
Question. When do you expect to have a design and development plan
for a next generation Air Traffic Management (ATM) system in place and
when do you envision starting the implementation of such a plan?
Answer. A draft plan is scheduled to be completed by December 2003.
The plan, which FAA is developing jointly with DOD, NASA, DHS and DOC,
will establish a more formal coordination process for research and
implementation activities.
Question. Since this recommendation will require a great deal of
interdepartmental coordination to meet both our civil, defense and
homeland security needs, what are you doing to ensure the appropriate
level of participation from DOD, NASA, and DHS?
Answer. The FAA has a long and successful working relationship with
NASA on research and development, an excellent relationship with DOD in
coordinating airspace requirements, and a new partnership with DHS/TSA.
By continuing to strengthen the relationships the Agency has with these
partners we can develop a joint approach--and most importantly a
greater alignment of resources--that will enable regular monitoring of
the unification of our plans, goals, and objectives.
Question. Administrator Blakey, what is your agency doing to take
advantage of the current slow down in the air travel demand to move
forward on Air Traffic Management (ATM) system modernization to ensure
we don't end up with horrendous delays like we had during the summers
of 1999 and 2000 when traffic returns?
Answer. The goal of the Operational Evolution Plan (OEP) is to
increase capacity and by doing so, improve the efficiency of the
National Airspace System and reduce delays.
It is the FAA's objective, through the initiatives of the OEP and
related Air Traffic Modernization projects, to increase the capacity of
the National Airspace System by 31 percent during the next 10 years.
While the events of September 11, and the subsequent downturn in the
industry have impacted various elements of the plan--particularly those
requiring collaborative work with the industry--the FAA is continuing
to put considerable energy into this initiative.
During the past 2 years the FAA has aggressively pursued its OEP
related initiatives. This includes airspace redesigns throughout the
National Airspace System, the implementation of Required Navigation
Performance (RNP), various capacity enhancing technologies,
collaborative decision making, and new runway construction.
The industry has experienced a reduction in the number of flights
and passenger loads. The market is not expected to reach pre-September
11 levels until 2005. However, overall capacity of the system, because
of the OEP, is continuing to grow by 3 to 5 percent each year. This
means, that when the system does recover we will be far less likely to
experience the delays we faced in 1999 and 2000.
______
Questions Submitted by Senator Barbara A. Mikulski
ACE-IDS
Question. It is my understanding that air traffic controllers are
very pleased with the performance of the new ASOS Controller Equipment-
Information Display System (ACE-IDS) systems that is currently provided
by a small business. I also understand that the older SAIDS4 systems in
the field use hard to maintain obsolete software and use computers that
have limited extensibility. What is your agency's position on the
desirability of the acquisition of ACE-IDS for additional towers and
TRACONS to replace the out of date systems?
Answer. Air traffic controllers are pleased with the ASOS
Controller Equipment-Information Display System (ACE-IDS). The
Information Display System 4 (IDS4) does include aging hardware and
software that will eventually need to be replaced. The FAA is
developing an acquisition strategy for the next-generation display
system. However, the agency will consider ACE-IDS as a potential
solution for satisfying requirements that exist prior to the next-
generation display system award.
Question. There are many capable small businesses that provide
products, services and systems to the FAA, including the current
provider of ACE-IDS. To what extent would the ACE-IDS or FAA Data
Display System (FAADDS) program lend itself to being set aside for
small business? Has the FAA examined that possibility?
Answer. The FAA is currently developing the acquisition strategy
for the next generation display system. All available options, to
include small business set asides, will be considered in the course of
the acquisition.
______
Questions Submitted by Senator Richard J. Durbin
WORKING GROUP ON THE AIRLINE INDUSTRY'S FINANCIAL CRISIS
Question. Does the FAA have a working group to address the
financial crisis in the airline industry?
Answer. The Office of the Secretary (OST), not the FAA, is
responsible for oversight of the financial condition of the airline
industry. OST does not have a formal working group on this issue, but
has undertaken extensive efforts both to monitor the financial
condition of the industry and to evaluate longer-term effects of the
industry's ongoing financial plight.
The airline industry is in the midst of the most difficult period
of financial distress since it was deregulated almost 25 years ago.
This began well before the terrorist attacks of September 11 and
reflected a combination of rapidly escalating costs--a trend that
started in 1999--and severely decreased demand beginning in early 2001.
With these changes, several years of record profits quickly turned to
losses.
The terrorist attacks greatly exacerbated losses for the passenger
carriers and led to record losses. The industry has suffered operating
losses of about $10 billion during each of the past 2 years, and is now
expected to lose another $7 to $8 billion this year. A number of
smaller carriers have failed, and two major carriers, United and US
Airways, filed for bankruptcy, although the latter carrier has now
successfully emerged from that process. To compensate for the ongoing
losses, airlines have undertaken large-scale capacity cuts, laid off
more than 100,000 employees, made operational changes designed to
enhance efficiency, and engaged in a wide variety of other efforts to
reduce operating costs. These efforts have not yet stopped continuing
losses as the industry has been confronted by a continuing series of
events that have affected demand, such as the Iraq war and SARS.
It is also important to note that not all news is bad. While the
large network airlines in particular have suffered massive losses
throughout this period even while significantly reducing capacity, in
marked contrast several low-fare airlines have profitably expanded
throughout this same period. Now that several low-fare airlines have
gained a critical mass and are expanding, cost control by the large
network carriers is paramount. The structure of the industry that will
evolve from this financial turmoil will depend in large part on how the
less stable carriers respond to their cost cutting and restructuring
efforts, but also on how soon and to what extent the economic recovery
brings relief.
OPERATIONAL EFFICIENCY IN THE NAS
Question. What steps are being taken to improve operational
efficiency in the national aviation system? Will they help the airlines
operate more efficiently and save money?
Answer. The FAA's work in improving the operational efficiency of
the National Airspace System can be considered both on a short-term and
long-term basis. Near-term operational improvements include such
initiatives as continued deployment of Traffic Management Advisor,
enhanced use of collaborative decision making tools to mitigate the
impacts of weather on efficiency, and Reduced Vertical Separation
Minima. Longer-term initiatives include additional runways as well as
the modernization of the en route automation system.
These efforts and systems will provide the airlines and flying
public with fuel-efficient routes, predictable schedules, and minimize
the disruptions caused by weather.
AIRPORTS WHICH WILL BENEFIT FROM NEW RUNWAYS
Question. Is Chicago O'Hare one of those airports which will
benefit from new runways?
In your testimony, you state ``We believe that new runways added at
the right airports are the single most effective way to increased
capacity.'' Is Chicago O'Hare one of those airports?
Answer. Chicago is one of the 35 airports in the agency's Capacity
Benchmark Study/Operational Evolution Plan. Since over 70 percent of
all scheduled traffic moves through these 35 airports and 15 of these
airports account for 80 percent of the total delays in the entire
National Airspace System (NAS), any project which increases capacity or
reduces delays at these airports has benefits that ripple through to
the entire NAS. O'Hare ranks third in the number of delays over the
past 5 years and had the highest ratio of delays to operations of any
of the Operational Evolution Plan (OEP) airports in 2002 (57.60 per
1,000). Given that O'Hare also handled more operations than any other
airport last year, these delay ratios are indicative of a delay problem
at O'Hare.
Delays at O'Hare International Airport will continue to grow as
demand increases. Delays at O'Hare are having a ripple effect
throughout the country and additional capacity is needed. The FAA is
currently evaluating a draft plan proposed by the City of Chicago for
the modernization of O'Hare Airport that is expected to significantly
increase its capacity. The modernization plan includes the realignment
of existing runways as well as the addition of a new runway.
______
Questions Submitted to Jeffrey N. Shane
Questions Submitted by Senator Richard C. Shelby
ROLE OF THE OFFICE OF THE SECRETARY IN FAA MATTERS
Question. Secretary Shane, now that the Coast Guard and TSA have
moved to the Department of Homeland Security, do you see an increased
role for the Office of the Secretary in matters relating to the FAA?
Can you give us a few examples?
Answer. There has been no change in the role of the Office of the
Secretary (OST) with relation to the Federal Aviation Administration
(FAA) since the transfer of the Coast Guard and Transportation Security
Administration (TSA) to the Department of Homeland Security. OST
coordinates the broad policy goals of the Department and the
administration among all the operating administrations. Its role with
regard to the FAA is no different than its role with any other modal
administration. For example, the aviation reauthorization legislation
(Flight-100) that was proposed by the administration was a
collaborative effort between the FAA and OST. The same collaborative
process was followed with the various operating administrations
included in the administration's surface transportation reauthorization
proposal (SAFETEA). We expect this coordination role to continue with
regard to all operating administrations within the Department.
FAA MANAGEMENT OF PROCUREMENT
Question. When you were at the Department in the early 1990's as
the Assistant Secretary for Policy, the FAA and the Department were
struggling with the Advanced Automation System procurement (AAS) and
now, to read the IG's testimony, we still seem to be struggling with
procurement at the FAA: WAAS, STARS, and Oceanic to be specific. And,
in fact, I believe that STARS and Oceanic are, in part, follow-on
procurements to the AAS procurement that was such a disaster for the
FAA.
Do you think that the FAA does a good job in managing procurements?
What should OST do or Congress do to help the FAA improve its
ability to deliver desired capability, reduce schedule slippages, and
reduce cost overruns?
Answer. The FAA remains committed to delivering National Airspace
System (NAS) systems within cost and schedule baselines. FAA has made a
number of management changes that strengthen its ability to develop
leading-edge technologies. For example, about 2 years ago, the agency
instituted a more disciplined process to establish cost, schedule, and
performance baselines. This new process acknowledges that a great deal
of planning and analysis must be invested in a program before clear
cost and schedule parameters can be established in an official
acquisition program baseline. The FAA's investment review board also
reviews major programs on a regular basis to identify and remove
barriers to successful completion. These processes are producing more
accurate cost estimates and better performance vis-a-vis program
baselines. In fact, over the past 2 years, the FAA has stayed within
cost estimates for the vast majority of modernization programs. With
respect to the specific programs mentioned:
The Wide Area Augmentation System (WAAS) program has overcome its
technical challenges and was commissioned on July 10, 2003. The Oceanic
program has been delivering significant, incremental improvements to
oceanic controllers since 1995. The Advanced Technologies and Oceanic
Procedures program combines those earlier oceanic improvements, adds
others, and integrates everything into a single controller workstation.
The program is on track to meet the deployment milestones in its
official acquisition program baseline.
The Standard Terminal Automation Replacement System (STARS) program
is also on track. Except for a 3-day delay in achieving an early
display capability in Syracuse in June, 2002, STARS has met every
single milestone on or ahead of schedule for the past 3 years. The
first full version of the STARS system began operations at an FAA
facility on April 30, 2002, in El Paso. It is currently operational at
El Paso; Syracuse; Philadelphia; Portland, Oregon; and Miami.
The FAA has also shown that it is willing to make hard decisions
when faced with significant cost variances. The agency cancelled the
Gulf of Mexico buoy program last year and just recently decided to
defer further expansion of the controller-pilot data link
communications program.
The Office of the Secretary of Transportation will continue to work
closely with the FAA--to establish realistic and accurate cost/schedule
baselines, improve program management, execute according to plan, and
cancel or defer programs when their costs exceed benefit profiles.
THE FUTURE OF THE U.S. AEROSPACE INDUSTRY
Question. The Commission on the Future of the United States
Aerospace Industry issued a report making a number of recommendations
to ensure the competitiveness of the American industry. One of the
Commission's recommendations called for the Federal Government to
establish a national aerospace policy and promote aerospace by creating
a government-wide management structure. How is the Department
responding?
Answer. The Secretary is establishing a joint planning office (JPO)
to address the air transportation portion of the recommendations. The
objective of the JPO is to coordinate with the National Aeronautics and
Space Administration, the Departments of Commerce, Homeland Security
and Defense, and outside stakeholders on a national plan for the
transformation of the air transportation system. These joint activities
will unify interagency research and development by aligning our vision,
goals, policies, and resources out to 2025. A second piece of the
management structure will be a policy committee, chaired by the
Secretary of Transportation, which will advise and guide these planning
efforts with inputs on the overall national policies that will promote
economic growth through the transformation of air transportation.
SUBCOMMITTEE RECESS
Senator Shelby. Thank you.
This concludes today's hearing. The subcommittee is in
recess subject to the call of the Chair.
We thank all of you for appearing.
[Whereupon, at 12:18 p.m., Wednesday, April 2, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
----------
WEDNESDAY, APRIL 9, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:02 p.m., in room SD-124, Dirksen
Senate Office Building, Hon. Richard C. Shelby (chairman)
presiding.
Present: Senators Shelby and Murray.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
STATEMENT OF ROBERT E. WENZEL, ACTING COMMISSIONER
ACCOMPANIED BY TODD GRAMS, CHIEF FINANCIAL OFFICER
OPENING STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. The Committee will come to order. With the
April 15th tax filing deadline less than a week away I believe
it is appropriate that we review the Internal Revenue Service's
(IRS) fiscal year 2004 budget request. Since the newly
nominated Commissioner of the Internal Revenue Service has not
been confirmed we will hear from Bob Wenzel, the Acting
Commissioner of the IRS today. I would also like to thank you
for appearing before the committee this morning.
Although I am the Chairman of the newly created
Transportation, Treasury and General Government Subcommittee,
these are not necessarily new issues for me. Many of you may
recall that I was the Chairman of the Treasury and General
Government Subcommittee several years ago when the
reorganization and modernization of the IRS was in its infant
stage. Since those days, the IRS has improved its service to
the taxpayers, but there's still a great deal more to be
achieved.
I am relieved to know that today, unlike the last time I
chaired a hearing on these issues, taxpayers are receiving
courteous service, refunds are being processed in a timely
manner, and more individuals are filing their taxes
electronically. The Offer in Compromise program is working
efficiently to help the taxpayers eliminate tax debts, and the
Innocent Spouse program, I am told, is also making progress
because only the guilty party is now being assessed the tax
liability.
Even with the success of all these programs, the IRS still
has a long way to go to provide the service that taxpayers
deserve and expect. I believe that the IRS should provide top
quality service to America's taxpayers by helping them to
understand and to meet their tax obligations, and by applying
the tax laws with integrity and fairness. Americans deserve and
expect no less from the Service.
Turning now to the IRS budget request, I would like to
point out that your fiscal year 2004 request is $10.4 billion,
an amount that comprises over 90 percent of the overall budget
for the Department of the Treasury. The IRS' ongoing business
systems modernization efforts will require $429 million in the
year 2004. The Subcommittee appreciates the efforts that
continue to go into this massive upgrade that we hope will
improve the speed, timeliness, and accuracy of IRS'
administration of the tax system.
I am aware that last year's efforts encountered some
setbacks and I am interested to learn how the Service has
gotten back on track and will ensure that such issues will not
occur again because I expect positive results from such an
investment.
While the IRS' traditional role is to implement and enforce
our tax laws, it has also been charged with administering the
earned income tax credit. The earned income tax credit has
expanded since its enactment in 1975 and at the same time has
become politically controversial. This budget proposes a number
of changes to that program because of the high level of fraud
associated with the program's administration. Each year the IRS
makes approximately $9 billion in erroneous earned income tax
credit payments. This is a direct and permanent cost to the
American taxpayer because it is virtually impossible to
recapture these payments once they have been made.
You are requesting $251.2 million in 2004 for the EITC
program, and of that amount, $100 million is requested to
implement the earned income tax credit task force
recommendations to address the problems associated with current
program administration that results in these overpayments.
Eliminating erroneous payments and ensuring the proper
administration of this program are certainly goals with which I
completely agree.
Compliance is a problem and you are requesting an
additional $133 million for staff to strengthen compliance. I
am interested in hearing of the abusive tax schemes you will be
targeting and how you will deal with them.
With the IRS' progression into the information age, I am
keenly interested in how the electronic filing system is
working, who is using the system, under what conditions, and
finally, what kinds of systemic cost savings are being
realized.
The IRS promotes electronic filing as ``free'' but I have
been made aware that most, if not all, of the programs or
services that are requested do charge a fee. I do not know
anyone that would agree that is free. I am interested in
exploring this more.
Along those lines, the IRS has initiated a new program
called Free File, which is a public-private partnership between
the IRS and a consortium of tax software companies that offer
free filing services to qualifying taxpayers. I applaud this
effort and the assistance that it provides low income
taxpayers. It is my understanding that savings identified
because of electronic filing and increases in productivity will
enable the IRS to close one of its processing sites. I would
think that the closure of this processing site will realize
some savings. Additionally, I am interested in how you think
continued increases in electronic filing will change the nature
of the IRS and its workforce.
Another significant change is this budget proposes to
employ private collection agencies to track down taxpayers that
owe billions of dollars in delinquent taxes. I do support the
effort of collecting delinquent debt, but this is of serious
concern because in addition to having a responsibility to
protect taxpayers' privacy, I cannot imagine IRS as having the
resources to administer and oversee such an undertaking.
While this is a fairly straightforward budget, the IRS
proposes a significant number of changes in the way that it
does business. As I mentioned, I am very interested in these
changes and look forward to your explanation of the proposal
that is included in the budget.
Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Thank you, Mr. Chairman. We are now less
than a week away from tax day, and 2002 was a very rough year
for America's working families. The economy has continued to
decline, hundreds of thousands of Americans were put out of
work, and many of them still have not found jobs. Even those
who have found jobs have had to take big pay cuts. Six days
from now many of those families will be hard-pressed to cover
their check to the IRS. At a time when our national economy is
struggling and when individual families are hurting, the
President is pushing for tax cuts that overwhelmingly favor our
wealthiest citizens. That has got to be pretty disheartening to
the many families who are struggling through no fault of their
own.
Today I want to shine a light on a similarly, I believe,
unfair proposal in the President's budget that could mean less
help for low income families. An initiative in the President's
2004 IRS Budget seems to be targeted at throwing working
families off of the rolls for receiving the earned income tax
credit or EITC. This is a tax credit that is targeted at the
working poor. The EITC is probably the most targeted means-
tested tax benefit in the entire Federal Code. It was started
by President Gerald Ford and it was greatly expanded under
President Reagan.
While many working families are eligible to receive it, as
many as 25 percent or more of those families do not even apply
for it. We should be taking steps to allow more eligible
families to get the help they need, but I believe the
President's proposal goes the other away. It would require many
of these working poor families to basically pre-certify that
they are eligible to receive the EITC. This proposal is
designed, we are told, to minimize fraud in the earned income
tax credit program.
Mr. Chairman, you will not find one Senator on this
committee or anywhere in the U.S. Senate that supports citizens
perpetuating fraud on the IRS. Tax fraud by any taxpayer should
never be tolerated. It is a disservice to every other family
that works hard and pays its share.
As we work to eliminate fraud we need to be careful that we
do not penalize the families who rely on this credit. As I
understand it, under the Administration's proposal, within a
couple of months, tens of thousands of families will receive
Federal forms requiring a great deal of documentation in order
to qualify them to take the Earned Income Tax Credit later in
the year. Much of this required documentation will be hard to
get, and the Federal tax assistance centers for the poor will
not be up and running during the summer months. By this time
next year more than 2 million families are expected to be
subject to this procedure. The average earned income tax is
roughly $1,660. That makes a pretty big difference for families
that are struggling.
I will repeat, I believe each and every case of tax fraud
should be prosecuted. Given the fact that the IRS never has and
never will have enough resources to audit every return, I am
mystified by its decision that $100 million in scarce funds
should be committed to going after the working poor. No amount
of fraud should be allowed for any taxpayer at any income level
and I think we need to be very cautious of proposals that could
have an adverse effect on families getting the benefits that
they deserve.
The IRS should go after people that are cheating the system
to receive the EITC when they are not eligible. But I believe
the IRS also carries the responsibility to make sure that these
enforcement efforts do not undermine the whole purpose of that
the EITC program and the families that rely on it.
I hope that we will pursue this critical issue of fairness
in our tax collection system today, Mr. Chairman. Thank you.
Senator Shelby. Mr. Wenzel, your written statement will be
made part of the record in its entirety. Proceed and sum it up,
if you would.
STATEMENT OF ROBERT E. WENZEL
Mr. Wenzel. Mr. Chairman and distinguished members of the
Subcommittee, thank you for this opportunity to discuss the
President's fiscal year 2004 budget for the IRS. Accompanying
me today is Mr. Todd Grams, the IRS' chief financial officer.
The President's overall fiscal year 2004 budget request
increases discretionary spending by 4 percent. Seen in this
context, the proposed 5 percent funding increase over the
fiscal year 2003 request for the IRS is greatly appreciated. We
will work hard to justify this confidence and investment.
Mr. Chairman, we also share your commitment to make the
most efficient and productive use of the taxpayers' dollars.
Indeed, beginning with the fiscal year 2004 budget, strategic
planning, budgeting, resource allocation and performance goals,
are much better aligned at the IRS.
Moreover, we are now integrating the development of our
budget with the establishment of performance measures, a key
part of the President's management agenda, and we believe we
are on the right track.
Mr. Chairman, let me briefly discuss the President's fiscal
year 2004 budget request. Simply put, it keeps us on track. The
funding provided will help us to build on the improvements we
have made in enforcement, service, and productivity, while
continuing to make longer term investments in our business
systems modernization program.
The principal strategic focus of the budget is
strengthening enforcement activities. Last October we realigned
our audit resources to focus on key areas of noncompliance,
such as offshore credit card users and promoters of abusive
schemes and scams.
To strengthen enforcement programs across the board, the
IRS budget request includes $133 million to fund numerous
initiatives. For example, new revenue agents and revenue
officers will be added to address offshore credit cards,
abusive trusts and shelters, high risk high income taxpayers,
and other priority work. We also will increase staff devoted to
frivolous returns and refund claims to counteract recent growth
and aggressiveness by promoters in this area.
A legislative proposal is also in the budget that would
authorize us to contract with private sector collection
agencies to supplement current IRS tax collection efforts. By
using these private collection agencies we expect to be able to
handle more collection cases at an earlier stage, before the
accounts become stale and uncollectible. Moreover, we can then
concentrate our resources on more complex cases and issues.
The second focus of the proposed budget is reinvestments.
Through the IRS' strategic planning and budgeting process, the
agency's senior managers identified a significant potential for
more effective and efficient use of current resources. A total
of $166 million and 2,145 FTEs were identified for reallocation
within the base budget for fiscal year 2004. By reinvesting
$166 million, primarily from increased productivity, we will be
able to increase performance in key tax administration areas.
For example, electronic filing success provides a great
opportunity to reduce and reallocate resources from submission
processing. The fiscal year 2004 budget reflects the first-ever
closing of a submissions processing pipeline as paper filings
decrease. We can use these reinvestments to strengthen
enforcement and improve customer service.
The third and final focus is business systems
modernization. The BSM program requests a total of $429
million, an increase of $65 million over the current fiscal
year 2003 budget level. Over the course of the BSM program,
these investments will benefit the IRS and taxpayers by
reducing operating costs, increasing cost avoidance, reducing
taxpayer burden, and boosting tax receipts.
PREPARED STATEMENT
Mr. Chairman, in conclusion, current trends in customer
service and enforcement are pointing in the right direction.
The President's budget will help us to maintain this upward
course and to succeed in achieving our mission.
Thank you.
[The statement follows:]
Prepared Statement of Robert E. Wenzel
INTRODUCTION
Mr. Chairman, and distinguished Members of the Subcommittee, thank
you for this opportunity to discuss the President's proposed fiscal
year 2004 budget for the Internal Revenue Service. Accompanying me
today is Mr. Todd Grams, IRS Chief Financial Officer.
I also want to thank the President and Treasury Secretary Snow for
their strong and visible support of the IRS and our critical mission
during these challenging times. The President's overall fiscal year
2004 budget request increases discretionary spending by 4 percent. Seen
in this context, the proposed 5 percent funding increase over the
fiscal year 2003 request for the IRS is greatly appreciated and we will
work hard to justify their confidence and this investment.
The funding provided in the President's budget will help us to
build on the improvements we have made in compliance, service and
productivity while continuing to make longer-term investments in our
Business Systems Modernization (BSM) program.
Mr. Chairman, I also welcome the opportunity to work closely with
you and we share your commitment to make the most efficient and
productive use of the taxpayers' dollars. Indeed, beginning with the
fiscal year 2004 budget, strategic planning, budgeting, resource
allocation and performance goals are better aligned. Moreover, we are
now integrating development of our budget with the establishment of
performance measures--a key part of the President's Management Agenda.
We believe we are on the right track.
BUILDING ON A GOOD FOUNDATION
Mr. Chairman, the IRS continues to make steady progress on the
mandates and new direction set forth by the IRS Restructuring and
Reform Act of 1998 (RRA 98). We continue to make gains on our three
strategic goals: top quality service to each taxpayer in every
interaction; top quality service to all taxpayers through fair and
uniform application of the law; and productivity through a quality work
environment.
Although still unacceptable in some areas, service to taxpayers has
improved. Returns, payments and refunds are better processed. Taxpayers
are getting better service over the telephone, in person and over the
Internet. Most are getting the right answers to their tax law and
account questions. New incentives, such as the innovative Free File
program, are breaking down the last barriers to e-file.
After careful study, we are redirecting our resources to the key
areas of noncompliance, such as offshore tax avoidance schemes. New
programs such as the Offshore Voluntary Compliance Initiative are
producing promising results.
The four customer-focused operating divisions are also meeting the
varying needs of their taxpayer segments. After years of planning, the
BSM program is entering a new, challenging but risky phase: producing
the flexible systems, technology and tools needed to provide service to
taxpayers on a par with the best private sector financial services
companies and to administer an increasingly complex tax system.
Clearly, we are doing a better job than when RRA 98 was enacted
into law although we are far short of providing the level of service
envisaged in the legislation. We still have a long way to go, but if we
stay the course we began almost five years ago, we can still succeed.
Customer Service
The IRS has made steady gains in better serving America's
taxpayers. Each filing season and year is appreciably better than the
previous one and we are building on those successes. With only one week
left in the filing season, we can detect some very positive trends.
For the 2002 filing season, the agency processed over 128.7 million
individual returns, and issued over 99.5 million refunds totaling
$191.2 billion. We believe we will exceed these numbers by the end of
this filing season.
In 2002, web site usage smashed all records with 2.7 billion hits
and 336 million files downloaded. For the 2003 filing season, usage on
our newly designed web site is already running almost 25 percent ahead
of last year's torrid pace.
IRS representatives also answered 25.9 million telephone calls
during fiscal year 2002; the automated telephone system handled about
62.4 million calls. For the 2003 filing season, total assistor calls
answered are running about level with last year, with automated calls
down dramatically. This drop can be most likely traced to the high
volume of calls we received last year related to the advance refund
checks.
The big news is assistor level of service. It is up 20 percent over
last year. This can be attributed to the implementation of new
telephone lines, less complicated scripts and lower demand. Time spent
waiting, while still below private sector standards, improved
substantially. Average wait time is down 26 percent from the previous
year.
Quality of service is as important as access to service. Taxpayers
expect not only to get through on our toll-free telephone lines but to
get the correct answer to their tax law or account question. For the
2002 filing season, taxpayers were receiving correct responses to 82.76
percent of tax law questions and 88.89 percent of account questions. So
far this filing season, the numbers stand at 82.02 percent and 86.42
percent respectively.
In 2002, more than 46.7 million taxpayers (36 percent) filed
electronically--a 16.4 percent rise from last year. This filing season,
all e-file is up by almost 9.23 percent and e-filing on line has grown
by 29.28 percent. Much of this surge can be attributed to the Free File
program that will help us reach the RRA 98 mandated goal of 80 percent
of individual returns filed electronically by 2007.
On January 16, 2003, the Treasury Department, the Office of
Management and Budget (OMB) and the IRS launched the free online tax
preparation and filing service called Free File. It was made possible
through a partnership agreement between the IRS and the Free File
Alliance, LLC--a private sector consortium of tax software companies.
The partnership agreement requires that the Alliance as a whole
provide free tax preparation and filing to at least 60 percent, or
approximately 78 million American taxpayers. The primary candidates for
Free File are those taxpayers who prepare their own taxes and still
file paper returns.
Initial Free File reports are most encouraging. As of March 19,
Alliance members have processed and transmitted more than 2.0 million
tax returns. This represents approximately 25 percent of the total 8
million online e-filed returns.
Improved service to taxpayers has not gone unnoticed. On the 2001
American Customer Satisfaction Index Survey (ACSI), taxpayers gave the
IRS an overall score of 62, an 11 percent increase among individual tax
filers over 2000, and a 22 percent increase over 1999. This was the
largest favorable gain of the 30 federal agencies surveyed by the ACSI.
The 2002 annual rating for IRS in the Roper Starch customer
satisfaction survey was 44 percent--a 38 percent increase over its 32
percent nadir in 1998. However, it reflects a small decrease from 2001.
Compliance
The IRS does not have the resources to attack every case of
noncompliance. Therefore, it must apply its resources to areas where
noncompliance is greatest while still maintaining adequate coverage in
other areas. After careful study, the IRS identified some of the most
serious compliance problem areas. These include: (1) promoters of tax
schemes of all varieties; (2) the misuse of devices such as trusts and
offshore accounts to hide or improperly reduce income; (3) abusive
corporate tax shelters; (4) underreporting of tax by higher-income
individuals; (5) accumulation and failure to file and pay large amounts
of employment taxes by some employers; and (6) the high rate of
erroneous earned income tax credit (EITC) payments.
Our goal was to stop the long-term decline in compliance while
beginning to focus effectively and efficiently on the key areas of
noncompliance. In most areas, the IRS achieved this goal. For example,
in fiscal year 2002, the IRS closed 140,737 Tax Delinquent
Investigation cases. It also examined 60,894 individual returns for
taxpayers with incomes exceeding $100,000 and 528 Large Cases
(corporate). All of these show gains over the previous fiscal year and
the audits of individuals with incomes over $100,000 represented a 22
percent increase. However, the 724,430 Tax Delinquent Account closures
represent a small drop over the same period last year.
Our new emphasis against promoters of abusive tax devices has also
shown results. As of March 19, 2003, the IRS had 25 promoter
injunctions granted, 17 promoter injunctions pending in District Court
and 17 pending at the Department of Justice, 216 promoter exams and
information requests underway, and 464 ongoing criminal investigations
of promoters of various tax schemes. The Offshore Voluntary Compliance
Initiative, which ends April 15, is also producing promising leads on
promoters and is bringing back taxpayers into compliance.
In addition, an abusive tax shelter disclosure initiative was
launched in 2002. The IRS processed 1,664 disclosures from 1,206
taxpayers who came forward. The disclosures cover 2,264 tax returns and
involved more than $30 billion in claimed losses or deductions.
Also, key to successfully executing a compliance program is better
data. The IRS failed to detect new areas of noncompliance in part
because of a reliance on increasingly obsolete data from the old
Taxpayer Compliance Measurement Program. (TCMP was last conducted in
1988.) The agency designed and is implementing a National Research
Program that will obtain the essential information with far less burden
on the taxpayer. New scoring models are being developed using 21st
century techniques, with interim models already deployed.
Technology and Modernization
Critical to our success is better managing our massive technology
and Business Systems Modernization program. From 15 separate
information systems operations, we created one MITS (Modernization and
Information Technology Services) organization that has the job of
serving all of our operating units and managing our modernization
program.
As part of this major transition, standards were established and
largely implemented for hardware and software. We consolidated
mainframes from 12 centers to three and established one standard for
desktop and laptop hardware and software. We implemented nationwide e-
mail and voice messaging systems, standard office automation software,
and security certifications and standards. We deployed important
interim applications systems, including Intelligent Call Routing,
Integrated Case Processing and the Integrated Collection System.
Business Systems Modernization laid the foundation for success of
this massive program. Both the long-term vision and enterprise
architecture were established and embedded as a living blueprint for
all business and technology improvement programs.
BSM has finally begun delivering the first projects with tangible
benefits to taxpayers, such as moving the first set of taxpayers to a
modern, reliable database in 2003. This year, taxpayers also began
using the new Internet Refund/Fact of Filing (IR/FoF) application that
allows them to check on the status of their return and refund 24 hours
a day, 7 days a week. Of paramount importance, we implemented the first
project on our new security system, which provides one standard for
ensuring the security of all IRS data and systems. IR/FoF usage has
already exceeded our expectations. So far this filing season, there
have been more than 8.7 million uses of ``Where's My Refund?''; we
project that number will rise to 15 million by the end of the year.
Over the next five years, all individual taxpayers will be moved to
the new database, cutting times for refunds on e-filed returns to less
than a week and allowing us to provide taxpayer and employees with up-
to-the-minute accuracy on their accounts.
All major management processes, which are needed to manage this
program on a continuing basis, were improved. Indeed, we are only the
second agency in the federal government to obtain Level Two
certification in the Software Engineering Institutions Capability
Maturity Model.
FISCAL YEAR 2004 RESOURCE REQUEST
For fiscal year 2004, the IRS is requesting resources totaling
$10.437 billion and 100,043 FTE (full time equivalent). This represents
an increase of $521 million (5 percent) over the President's fiscal
year 2003 request.
Mr. Chairman, the fiscal year 2004 budget request can be best
viewed through its three strategic drivers that are derived them from
the IRS performance-based budgeting process.
First is Compliance.--The principal strategic focus of the
President's fiscal year 2004 IRS budget is strengthening compliance
activities, especially in the area of high-income, high-risk taxpayers
and businesses, and abusive tax avoidance schemes and offshore trusts.
A legislative proposal would also authorize the IRS to contract with
private-sector collection agencies to supplement current IRS tax
collection efforts. The budget further includes a major initiative to
reduce erroneous payments in the Earned Income Tax Credit (EITC)
Program.
Second is Reinvestments.--We are committed to better utilizing the
resources the IRS already has by ``reinvesting'' base resources. By
reinvesting $166 million, primarily from increased productivity within
the base budget, the IRS will be able to deliver increases in the
performance of key tax administration programs that are significantly
higher than the additional dollar and FTE increases requested in the
budget.
Third is Business Systems Modernization.--Investments in
modernization through the BSM program would continue with a total
request of $429 million, an increase of $65 million above the fiscal
year 2003 appropriation. Over the course of the BSM program, these
investments will benefit the IRS and taxpayers by reducing operating
costs, increasing cost avoidance, reducing taxpayer burden and
increasing tax receipts.
Mr. Chairman, I also want to draw the subcommittee's attention to a
new task that was added to the IRS' traditional tax administration
duties and operations. In August 2002, the President signed Public Law
107-210, the Trade Adjustment Assistance Act of 2002. Title II of this
statute provides a refundable tax credit for the cost of health
insurance for certain individuals who receive a trade readjustment
allowance or a benefit from the Pension Benefit Guaranty Corporation
(PBGC). The tax credit is equal to 65 percent of the health insurance
premium paid by eligible persons to cover them and qualifying family
members. The IRS must implement the Health Coverage Tax Credit
provisions.
We are requesting $35 million for Health Insurance Tax Credit
Administration. The amount provided in the Consolidated Appropriations
Resolution, 2003 ($70 million) will be used to provide software,
hardware, and contract services to develop the system mandated by
Public Law. The IRS will oversee the contractor's work.
Let me now provide the highlights of our proposed fiscal year 2004
budget.
COMPLIANCE
Additional Funds Requested to Strengthen Tax Administration Compliance
(+$133M and +1,700 FTE)
The Internal Revenue Service is realigning its audit resources to
focus on key areas of noncompliance with the tax laws. The strategy
represents a new direction for the agency's compliance effort.
Following months of research and planning, the new approach is
focusing on high-risk areas of noncompliance. Our effort will generally
focus first on promoters and then on participants in these various
schemes. The initiative will feature new and enhanced efforts on the
most serious compliance problem areas described earlier in my
testimony.
Our Small Business/Self-Employed (SB/SE) Operating Division will
handle the new effort in these key areas affecting individuals and
businesses. Compliance efforts will continue in other parts of the
agency, such as the tax shelter initiative in the Large and Mid-Sized
Business (LMSB) Division.
To strengthen compliance programs across the board, the IRS budget
request includes $133 million to fund numerous compliance initiatives.
Key examples of these initiatives are:
Address Complex Enforcement Issues of Small Business/Self Employed
Taxpayers (+$56M and 887 FTE).--Additional staff will be provided to
all major compliance programs in SB/SE and new workload selection
systems and case building techniques will be employed. New revenue
agents (exam work) and revenue officers (collections work) will be
applied in the field to address offshore credit cards, abusive trusts
and shelters, high-risk/high-income taxpayers, and other priority work.
Additional staff at call sites will be employed to specialize in out-
going calls and offset levies. Greater resources in the Automated
Substitute for Return (ASFR) program will allow us to focus on high-
income taxpayers who do not file returns. Also, staff devoted to
frivolous returns and frivolous refund claims will be increased to
counteract recent growth and aggressiveness by promoters in this area.
Address Passthrough Entities and Abusive Trusts of Large Business
Taxpayers (+$22M and 258 FTE).--This increase will allow the IRS to
apply the most experienced revenue agents to the highly complex and
technical issues of passthrough entities--such as partnerships, trusts
and S-corporations--and abusive corporate tax shelters while
maintaining minimum coverage of other priority exam work.
Counterterrorism (+$6M and 24 FTE).--The IRS is heavily involved in
the fight against both global and domestic terrorism. Demand for the
financial investigative skills of Criminal Investigation (CI) special
agents remains high. After September 11, 2001, over 273 FTE in fiscal
year 2002 and 206 FTE projected in fiscal year 2003 were redirected
from CI tax enforcement activities to counterterrorism related
activities. CI is working on counterterrorism with the Treasury
Executive Office of Terrorism Financing and Financial Crimes and is an
integral part of the nation's war on terrorism.
Use of Private Sector Contractors for Collection of Taxes Due
There is a significant and growing backlog of cases involving
individual taxpayers who are aware of their tax liabilities but are not
paying them. We believe that many of these individuals are capable of
paying their outstanding tax liabilities. This is unfair to every hard-
working American who pays his or her fair share of taxes. To address
this problem, the President's budget proposes to support the IRS'
collection efforts with private collection agencies (PCAs) that will
engage in specific, limited activities, allowing the IRS to concentrate
its resources on more complex cases and issues.
By eliciting the assistance of PCAs, the IRS expects to be able to
address this important part of the existing backlog of collection
cases. Over time, the IRS expects that PCAs would assist the IRS in
handling more collection cases at an earlier stage in the process--
before the accounts become stale and uncollectible. PCAs have proven
successful with over 40 states and have been used for many years with
other federal programs. PCAs would hold no enforcement power and their
employees would be subject to the same rules that apply to the IRS
governing taxpayer rights and confidentiality. Consequently, taxpayer
protections would be unaffected. The IRS would be required to closely
monitor the activities and performance of the PCAs to ensure these
rules are followed.
Reduce Inappropriate Payments in EITC Program (+$100M and +650 FTE)
The EITC program benefits millions of low-income workers. The EITC
lifts nearly 4 million people, especially single mothers, out of
poverty each year. However, the current error rate for the EITC program
is too high. In 1999, between 27 and 32 percent of EITC claims--or
between $8.5 billion and $9.9 billion--were paid in error. EITC has
been consistently listed among high-risk federal programs. Congress has
recognized this by providing a separate appropriation that has been
used for EITC compliance enforcement.
The Fiscal Year 2004 Budget requests an additional $100 million to
begin a new strategy for improving the EITC program. This approach,
suggested by the Department of Treasury EITC Task Force, concludes that
the IRS must obtain additional information on certain EITC eligibility
criteria before payment of the EITC-portion of refunds. A major portion
of the request will be used to invest in suitable information
technology and develop business processes.
The IRS will begin to use an integrated approach to address
potential erroneous claims by identifying cases that have the highest
likelihood of error before they are accepted for processing and before
any EITC benefits are paid.
A key part of this strategy is to begin certifying taxpayers who
claim qualifying children on the relationship and residency
requirements. In addition, the IRS will use limited additional taxpayer
information, in combination with taxpayer-specific IRS historical data,
third party data and error detection systems to detect and freeze the
EITC-portion of refunds that pose a high risk or filing status errors
or income misreporting. The IRS will seek to minimize the burdens on
taxpayers by using existing databases and other sources of information
to verify eligibility in advance. This integrated approach is designed
to provide far greater assurance that EITC payments go to the
individuals who qualify for the credit, without sacrificing the goals
of the EITC program.
REINVESTMENTS
Resources Freed-Up Within the Base Budget for Reinvestment (-$166
million and -2,145 FTE)
The President's budget submission states, ``In fiscal year 2004,
the IRS will improve performance primarily through better management
and fundamental reengineering of business processes, and secondarily by
increases in resources.''
Through the IRS' Strategic Planning and Budget process, the
agency's senior managers identified significant potential for the more
effective and efficient use of current resources. A total of $166
million and 2,145 FTE were identified for reallocation within the base
budget in fiscal year 2004. Examples of sources for reallocations
include:
Submissions Processing/Electronic Filing (-$13.5M and -366 FTE).--
IRS' continued success with electronic filing provides a great
opportunity to reduce and reallocate resources from submission
processing to strengthen compliance and improve customer service. The
fiscal year 2004 budget reflects the first-ever closing of a
submissions processing pipeline (Brookhaven, NY) as the labor-intensive
processing of paper filings decreases across the system.
Compliance Support Reengineering (-$26M and -394 FTE).--
Reengineering of the compliance program in SB/SE will improve
operational efficiency and workload selection, and reduce taxpayer
burden. Business process improvements and centralization of the
Compliance Support Organization will generate FTE that can be reapplied
in front-line activities.
Remittance Transaction Research (-$9M and -199 FTE).--Creating a
central data repository (taxpayer payment data and related images) for
all individual taxpayer payment documents will increase efficiency,
improve accuracy of posting payments, and reduce the time it takes to
resolve payment issues.
Information Technology (-$46M and -39 FTE).--Efficiencies through
reengineering and other efforts will reduce expenditures in end-user
support, computing center support, and network operations and
maintenance.
Reinvestment of Reallocated Funds within the Base Budget (+$166 million
and +649 FTE)
Resources reallocated within the base budget would be used to
improve Customer Service and strengthen Compliance programs. The
specific initiatives include:
Reduce Compliance Staff Support of Filing Season (+$13M and +154
FTE).--Due to lower-than-needed staff levels in Field Assistance
Programs for individual taxpayers, the IRS must detail compliance staff
from SB/SE to field assistance during the filing season to meet
taxpayer demand. Under this initiative, we would hire additional staff
in field assistance so that the level of service in assistance is
maintained while the number of compliance details can be reduced, and
compliance staff can devote more time to compliance activities.
Improve Telephone Service to Small Business/Self Employed Taxpayers
(+$11M and +184 FTE).-- Additional resources are needed to assist SB/SE
taxpayers in Accounts Management phone services. These staff members
assist taxpayers with a broad range of issues concerning taxpayers'
accounts.
Information Technology (+$33M and 0 FTE).--IT investments will
expand web services to taxpayers, replace aging servers, purchase
needed software, and expand high speed and secure access for revenue
agents at remote sites.
CONTINUED INVESTMENT IN BUSINESS SYSTEMS MODERNIZATION (+65 MILLION AND
0 FTE)
The BSM program request totals $429 million, an increase of $65
million over the current fiscal year 2003 level. The BSM account
provides for modernizing IRS-wide business practices and acquiring new
technology.
We use a formal methodology to prioritize, approve, fund and
evaluate our portfolio of BSM investments. This methodology enforces a
documented, repeatable and measurable process for managing investments
throughout their life cycle. The IRS Core Business System Executive
Steering Committee, chaired by the Commissioner, approves investment
decisions. This executive-level oversight ensures that products and
projects delivered under the BSM program are fully integrated into IRS
Business Units.
Highlights in BSM for fiscal year 2004 include: (1) modernized e-
File will provide electronic filing for large and small businesses; (2)
implementation of the Integrated Financial System will replace the
current antiquated administrative core accounting system; (3) the first
release of the Custodial Accounting Project will put individual
taxpayer data in a data warehouse for easier access and analysis; and
(4) the Customer Account Data Engine and Internet Refund Fact of Filing
will be revised for tax law changes to support the 2004 filing season.
Given the changes in the fiscal year 2003 and fiscal year 2004 BSM
funding totals, we are currently reviewing the fiscal year 2004
allocation project-by-project to determine the optimum plan. They are
discussed in greater detail below.
Achievements and Benefits
In fiscal year 2002, the BSM Program provided real benefits,
including a secure online system and system management capability and
the aforementioned Internet Refund/Fact of Filing pilot program. In
fiscal year 2003 and fiscal year 2004, additional supporting
infrastructure services will be added, and an increasing number of
business and internal applications will be delivered, creating benefits
for taxpayers and practitioners and enabling internal efficiencies.
The fiscal year 2003 delivery plan will move the BSM Program into a
wide spectrum of critical new areas:
--Customer Account Data Engine (CADE) R1.--In July 2003, CADE will
begin processing single 1040EZ filers (both electronic and
paper). Taxpayers covered under CADE will receive their refunds
about 40 percent faster than under Master File processing, if
they use direct deposit. More importantly, we will have taken
the first of many steps to replace the 40-year old Master
Files.
--Custodial Accounting Project (CAP).--We will continue development
and testing of CAP Release 1 scheduled for deployment in the
first quarter of fiscal year 2004. CAP will create a repository
for modernized Individual Master File data and will address
documented financial material weaknesses.
--Enterprise Architecture (EA) and Tax Administration Vision and
Strategy (TAVS).--TAVS focuses on creating a long-term vision
of how the agency should work in the future. Delivery and
acceptance of EA Release 2.0 was a significant achievement. We
also conducted a planning effort called ``TAVS Refresh'' to
identify gaps and outdated information in TAVS which we plan to
address in fiscal year 2003.
--e-Services.--e-Services sub-releases will provide: registration of
electronic return originators, Taxpayer Identification Number
(TIN) matching, initial partner relationship management
capabilities, electronic account resolution, transcript
delivery, secure e-mail, and bulk TIN matching.
--Infrastructure (STIR and Infrastructure Shared Services [ISS]).--
This project provides the basic secure infrastructure necessary
to support the modernization effort including e-Services R1,
IR/FoF, Internet Employer Identification Number (EIN), and
subsequent fiscal year 2003 releases.
--Integrated Tax Administration Business Solutions (ITABS).--Projects
to ensure we understand requirements and select COTS
(commercial off-the-shelf) solutions that can effectively
integrate business processes in IRS functions.
--Internet EIN.--This application will automate Employer
Identification Number (EIN) requests over the Internet.
Currently, the EIN request process is cumbersome and people-
intensive, often resulting in unacceptable delays for those
starting new businesses.
--Integrated Financial System (IFS).--Although the first release of
the new financial system will not go live until October 1, 2003
(therefore, an fiscal year 2004 delivery project), it is likely
to be our most work-intensive project during fiscal year 2003.
--Modernized e-file.--The Modernized e-file project will be in pre-
deployment testing for all of fiscal year 2003, with initial
deployment in early calendar year 2004, with Forms 1120 and 990
e-file capabilities.
BSM benefits delivered in fiscal year 2004 will include:
--Modernized e-file will provide electronic filing for large and
medium-sized businesses (Forms 1120 and 990), as well as a new
Tax Return Data Base, which will greatly improve customer
service and issue resolution.
--e-Services will provide support for the 2004 Filing Season as well
as implement support structures for modernized e-file planned
for implementation later in the fiscal year.
--IFS will develop the detailed functional requirements to support
internal management requirements for financial and management
planning, execution and reporting.
--CAP will provide an integrated enterprise data warehouse to support
organizational data needs, performance measurement, and tax
operations process improvements.
--CADE will allow for electronic processing of selected Form 1040
Wage & Investment returns with additional taxpayer segments
that have increasingly more complex tax returns and/or balance
due returns.
--ISS will establish a program whose goal is to deliver a fully
integrated shared information technology infrastructure to
include hardware, software, shared applications and data,
telecommunications, security and an enterprise approach to
systems and operations management. This approach results in
overall reductions in time and dollars to develop, deploy, and
maintain the infrastructure and the business applications that
use the infrastructure.
IMPACT OF UNFORESEEN COSTS ON STAFFING LEVELS
Although staffing increases were supported in recent budgets, they
could not be realized because of unexpected cost increases. The IRS is
labor intensive; salaries and benefits make up 71 percent of our
Operations Budget. Therefore, any unexpected major cost that the agency
must absorb will have a negative effect on staffing levels, despite
efforts to reduce non-labor costs.
For fiscal year 2003, the President proposed a budget for the IRS
that included 98,727 FTE (less EITC). However, the total FTE for fiscal
year 2003 (less EITC) is currently expected to be 96,802, which is
1,925 FTE less than the President's request. The following are examples
of what drove projected fiscal year 2003 FTE down below the President's
request by 1,925.
--The unfunded increase in the fiscal year 2002 annual pay raise from
the President's 3.6 percent request to the 4.6 percent enacted
level (Cost: $43 million).
--Postage increases above initial budget projections (Cost: $22
million).
--Unfunded increase in security costs after 9/11 (Cost: $20 million).
Let me put the staffing problem in even greater perspective. Over
time, the current fiscal year 2003 FTE projection is 1,249 FTE less
than what was requested in the President's fiscal year 2001 Budget. It
is also important to note that the fiscal year 2003 appropriation bill
created a $68 million unfunded pay increase and an across-the-board cut
of $64 million. These actions will further reduce our staffing levels
and directly affect our ability to deliver on performance projections
included in the fiscal year 2003 budget request.
modifications to the irs restructuring and reform act of 1998 (rra 98)
Mr. Chairman, in the fiscal year 2004 budget submission, the
Administration proposed modifications to RRA 98. Last year, the House
passed legislation that contained five of these proposals; the Senate
did not act before adjourning. We commend the House for its actions and
believe that these modifications preserve the intent of the Act while
allowing us to administer it more efficiently and effectively. We urge
the Congress to take similar action this year.
There are six parts to the Administration's proposed modifications.
The first modifies infractions subject to Section 1203 of RRA 98 and
permits a broader range of available penalties. Our ability to
efficiently administer the tax code is currently hampered by a strong
fear among our employees that they will be subject to unfounded 1203
allegations, and perhaps lose their jobs as a result. This proposal
will reduce employee anxiety resulting from unduly harsh discipline or
unfounded allegations.
The second part adopts measures to curb the large number of
frivolous submissions and filings that are made to impede or delay tax
administration.
The third permits the IRS to enter into installment agreements with
taxpayers that do not guarantee full payment of liability over the life
of the agreement. It allows the IRS to enter agreements with taxpayers
who desire to resolve their tax obligations but cannot make payments
large enough to satisfy their entire liability and for whom an offer in
compromise is not a viable alternative.
The fourth allows the IRS to terminate installment agreements when
taxpayers fail to make timely tax deposits and file tax returns on
current liabilities.
The fifth streamlines jurisdiction over collection due process
cases in the Tax Court, thereby reducing the cycle time for certain
collection due process cases.
The sixth and last provision would eliminate the monetary threshold
for IRS Chief Counsel reviews of offers in compromise.
The Administration also has two proposals to improve IRS efficiency
and performance from current resources. The first would modify the way
that Financial Management Services (FMS) recovers its transaction fees
for processing IRS levies by permitting FMS to retain a portion of the
amount collected before transmitting the balance to the IRS, thereby
reducing government transaction costs. The offset amount would be
included as part of the 15-percent limit on levies against income and
would also be credited against the taxpayer's liability.
The second proposal would encourage growth in electronic filing by
extending from April 15 to April 30 the return filing and payment date
for the filing of individual income tax returns, if the return is filed
electronically and any balance due is paid electronically.
CONCLUSION
Mr. Chairman, in conclusion, the President's proposed fiscal year
2004 budget for the IRS keeps us on track and will allow us to provide
both the short-term and longer-term benefits to taxpayers, which has
been the hallmark of our modernization program from its inception. Once
again, I thank the President and his Administration for their continued
support of our program and their confidence that we can get the job
done, and at the least cost to America's taxpayers.
ELECTRONIC FILING
Senator Shelby. I want to talk to you a little about
electronic filing. This process clearly makes your job easier
and maximizes efficiency within the Service, but there are
serious concerns about the inability of the average American to
fill out his or her own tax return and press a button on the
IRS's web site and file their return electronically. I
understand that there are a number of reasons floating out
there but I would like to hear from you, why can't I or
somebody else go to the IRS' web site, fill out my tax return
and file it unless, of course, I print it out and put it in the
mail?
Mr. Wenzel. This year, for the first time, we do offer the
opportunity to have individuals come into the IRS.gov site and
avail themselves of a program we refer to as Free File. There
are 17 commercial software firms that make up the consortium. I
need to back up and explain that a little bit.
The electronic filing program started from very humble
beginnings in 1996 at the IRS. The first year we had 26,000
returns filed. This year we expect about 53 million returns
filed electronically of the 132 million individual income tax
returns that will be filed this calendar year. So there is a
significant increase.
As you are aware, the Congress in 1998, as a result of the
Restructuring and Reform Act of the Internal Revenue Service
set a goal for the IRS that by the year 2007, 80 percent of
individual and business tax returns will be filed
electronically. While we have had, as I mentioned, some
significant success, attracting 53 million electronically filed
individual returns this year, we still have quite a ways to go
for not only individual returns, but also business returns, to
reach that goal in 2007.
FREE FILE INITIATIVE
Senator Shelby. Can you file an electronic return from your
home if you had the software?
Mr. Wenzel. You can file, beginning this year, with the
consortium that we entered into, this agreement with the
private sector. One of the efforts that we are--as I mentioned,
it is the first year--trying to increase the number of returns
filed electronically. We have a long-standing position at the
IRS, that we were not going to compete with the private sector
software vendors, to offer free software. That was a position
that the IRS took, Treasury took.
As a result of that position we contacted the private
sector to form this consortium. As a result of it, this Free
File initiative has come up on the IRS.gov web site. Over 68
percent of individuals required to file a return are able to
use that right now, at no cost to them. Because all they have
to do is pick one of the 17 sites, go into it and have the
opportunity to file a return at no cost.
Senator Shelby. They would have to have the proper software
to do this, would they not?
Mr. Wenzel. No, it is there. It is on our system. So far
this year over 2.1 million individuals have opted to use one of
those 17 software products. Since it is still a week to go----
Senator Shelby. How much does that cost?
Mr. Wenzel. There is no cost.
Senator Shelby. No cost to it?
Mr. Wenzel. No cost.
Senator Shelby. Free?
Mr. Wenzel. Maybe the confusion here----
Senator Shelby. There is some confusion.
Mr. Wenzel [continuing]. Because you can go in and use the
programs at no cost, but what we agreed to with these 17
vendors is they would have the opportunity to use what is
called pop-up screens. So if an individual went in, there is a
screen that pops up and says, ``Would you be interested in
getting some additional information, some products and services
that we offer?'' If you said no, the pop-up screen would go
away and you can continue to file your return. But if you said
yes, that screen will open up and there are other products and
services there.
That is where the confusion may be, Mr. Chairman, because
some individuals have availed themselves to take advantage of
the additional services offered where there is a cost. But to
file a return, there is no charge for that.
Senator Shelby. The system that I understand is currently
in place requires, for example, me to seek an IRS-approved e-
file partner to file my return electronically; is that right?
Do you want me to repeat that?
In other words, the system I understand that is currently
in place would require me to seek an IRS-approved e-file
partner to file my tax return electronically. Is that what you
were talking about?
Mr. Wenzel. Yes, the partner----
Senator Shelby. That is what I thought.
Mr. Wenzel [continuing]. Would be one of these 17----
Senator Shelby. Seventeen of them?
Mr. Wenzel. Yes, for this first-year effort.
Senator Shelby. Now that costs some money, does it not? It
cost something. I do not know how much.
Mr. Wenzel. Not for the taxpayer to go in and file their
return.
Senator Shelby. But as I understand, my staff did a quick
search on your web site and found a few examples I want to
share with you. There is a $6.95 senior special, the number one
tax forms for beginners is $9.95, and finally, there is the
complete tax package for $24.95 and when you are finished you
can e-file them for free. In other words, you have got to do
that first, is my understanding. Am I wrong?
Mr. Wenzel. Mr. Chairman, I have received e-mail, I have
received correspondence----
Senator Shelby. I do not know if I am wrong or not. I am
just asking the question.
Mr. Wenzel [continuing]. From individuals of the 2-million-
plus that have used this that have said, this is great because
it has been free. It was no cost to me in terms of filing.
Senator Shelby. In other words, they did not have to pay
that other money?
Mr. Wenzel. No. I need to check on the examples given here
because----
Senator Shelby. We will furnish those for you, because we
would be interested----
Mr. Wenzel [continuing]. I would really need to look into
that immediately.
BUSINESS SYSTEMS MODERNIZATION
Senator Shelby. Business systems modernization, something
we have been working with a long time. The Service has informed
the staff that the IRS' current IT infrastructure is not
equipped to receive and process electronic transactions
directly from individual taxpayers. Given our discussion here,
I am interested to know if, in fact, the Service's massive
business systems modernization project includes an upgraded
capability to receive and process electronic transactions
directly from individual taxpayers. And if not, why not.
Mr. Wenzel. One of our initiatives and programs in the
future, as it relates to the business systems modernization, is
to make that a reality in terms of account information.
Senator Shelby. Would that not help a lot and move a lot of
people into electronic filing?
Mr. Wenzel. Absolutely.
Senator Shelby. And that is what you really want.
Mr. Wenzel. That is one of our e-services that we have been
trying to make a reality because it is done so much already in
the private sector. The timeliness improves significantly, less
cost.
PRIVATE COLLECTION AGENCIES
Senator Shelby. I want to move into debt collection. It is
my understanding you are planning to use private collection
agencies to collect some of the $280 billion owed in taxes. I
remember Senator Kerry and I were involved in this committee at
one time and we tried that. But actually it did not work very
well at that time. Maybe it will work now.
But what will IRS do to ensure that this will be a
worthwhile project and cost effective this time?
Mr. Wenzel. As you mentioned, there was a pilot in 1996-
1997. We learned from that experience, in terms of benefiting
from that limited pilot. We also, in getting ready for this
proposal, in terms of the budget request, included three
private sector companies; a large organization, medium-size,
and a small business organization to get their input.
You are right in the sense that the total number of
accounts receivable, what we call now potentially collectible
inventory, is well over $200 billion. A lot of that, as you
know, is corporations out of business or deceased taxpayers.
The reality is that we know for a fact there are at least $13
billion right now just waiting for a contact to be made that
has an opportunity to potentially be collectible. The reality
is that the best we can do at the present time is, once a year,
send out a notice to remind that taxpayer they still owe that
money.
There is a 10-year statute period which we have to collect
the potentially collectible inventory. Every year there is a
significant amount of money dropping off because we have not
attempted a telephone call, for example.
Senator Shelby. How do you plan to ensure the protection of
taxpayers' rights and the confidentiality of taxpayers to
taxpayer information when you contract this out to private
contractors?
Mr. Wenzel. This is a very important area for us, Mr.
Chairman, in terms of----
Senator Shelby. Very sensitive too.
Mr. Wenzel. Absolutely. We expect the private sector
collection agencies, when they go out and hire people, the
people they are hiring will have to meet the same kind of
requirements that we expect of IRS employees in terms of
background checks and so forth.
We have included our National Taxpayer Advocate in the
development of this whole proposal for this very--for obvious
reasons, but particularly for this reason, to ensure that
taxpayer rights are not violated.
Senator Shelby. It is very important.
What will be the cost of these contracts compared to the
cost of collecting the same debts using IRS employees? Have you
done any comparisons there?
Mr. Wenzel. Mr. Chairman, we are finalizing what the
projected cost would be. This is not the first time this kind
of effort has been done. Forty-two States currently use
collection agencies as do the Department of Education and also
Financial Management Services, which is part of the Treasury
Department. We are having discussions with them about the cost
for this, but our proposal is basically that the costs would be
recaptured in the proceeds that are collected by these agencies
or companies.
Senator Shelby. So that leads me to the compensation of the
contractors, the people you contract out with. Is their
compensation a percentage of what they collect?
Mr. Wenzel. Yes, that is generally what the States and the
two Federal agencies that I mentioned that have entered into
these kinds of agreements do, and there is a certain percentage
of the receipts that are collected.
Senator Shelby. Okay.
Senator Murray?
EARNED INCOME TAX CREDIT
Senator Murray. Thank you, Mr. Chairman. In the fiscal year
2004 President's budget, the IRS is proposing a so-called pre-
certification initiative for the EITC program, and while you
are asking for the money for this in the next fiscal year, you
are planning to send verification documents as soon as this
July, I understand, to about 45,000 individuals requiring them
to provide additional documents to ensure their EITC
eligibility. These taxpayers, I understand, will have until
this December to submit verification documents and your agency
intends to delay the EITC portion of their refund until IRS can
review that documentation.
Can you tell me how quickly IRS expects to review that
documentation?
Mr. Wenzel. The proposal, in terms of the $100 million, is
that we would send out letters to 45,000 taxpayers to ask them
to pre-certify things like what we call a ``qualifying child.''
The intent is not to put more burden on the taxpayers as it
relates to how we are doing business today. As you are aware,
the EITC program for some time has been determined to be a high
risk program because it is a tax credit. For a number of years
now we have been funded additional monies, not only to do the
outreach, the informing and educating to make sure that
individuals who are eligible for EITC are in the program, but
also there was certain direction given to us to make sure we
minimized the amount of fraud that goes into the program.
Senator Murray. I was not actually asking about your
rationale. I was asking, because you are sending 45,000
questionnaires out and you are telling taxpayers that it may
delay their refund, how long can we tell these people that it
is going be, that it will take you to review this
documentation?
Mr. Wenzel. We would try to make sure that we keep that
time span to the absolute minimum. Right now, Senator, we are
still talking with some interest groups on the outside. We have
not even finalized the form that would be used. We have had two
meetings that have been coordinated by our National Taxpayer
Advocate to make sure that the form and what we are requiring
for the documentation is kept to the absolute minimum, so that
once the information comes in to us, we can immediately review
it, turn it around and issue the refund.
Senator Murray. Do you expect a lot of EITC payments to be
delayed this year?
Mr. Wenzel. Delayed in the sense of, in the past that--yes,
that would be a correct statement. There would be a delay and
we hope to keep it to an absolute minimum.
Senator Murray. Can you give us any kind of time line on
that?
Mr. Wenzel. I think what is key here, Senator, is to really
finalize--as I mentioned, we are still finalizing some of those
decisions, working with considered outside stakeholders. That
would be key. I would be happy, once we get that--it should be
done----
Senator Murray. If you could let us know. We will be
hearing from our constituents and we need to give them a
response on that.
Then I understand that you expect to expand this project
next year and require pre-certification by two million EITC
recipients. I am curious if before you expand it from the
45,000 to the two million, are you going to do any kind of
evaluation?
Mr. Wenzel. Absolutely. That is why we are starting out
with a much smaller number; that is correct.
Senator Murray. And you will have the results of that
evaluation before you send out pre-certification documents to
two million people?
Mr. Wenzel. We will carefully track that and make sure that
we completely analyze what has occurred here, and then make a
decision in terms of what is the correct number. We think the
two million is a fair estimate, but that does not mean that
that would not be modified based on what we see.
Senator Murray. But you are going to take a look at what
happens with the 45,000, and if we are seeing tons of delay and
a lot of problems then you will relook at that?
Mr. Wenzel. We will try to make sure that we do this right
the first time, and not incur any delay, even with the 45,000.
But if that is the case, we will make sure we modify our
process and carry that into the next year and the year after
that.
Senator Murray. GAO estimates that in 1999 25 percent of
eligible households, or about 4.3 million households, did not
know even how to claim this credit. The Government Performance
and Results Act requires you to set quantifiable goals for your
agency's objective. Does your fiscal year 2004 performance plan
set a numerical goal to increase the participation rate for
EITC?
Mr. Wenzel. We have not quite finalized that goal yet, but
it is important, based on the feedback we received from GAO, to
make sure that we have an appropriate performance measurement
in that area.
Senator Murray. Why has it not been done yet?
Mr. Wenzel. We are still working through what the right
percentage should be in terms of first time effort and setting
the right goal.
Senator Murray. So you have not set a numerical goal. When
do you expect to do that?
Mr. Wenzel. We should be able to do that within, probably
within the next 45 days.
Senator Murray. The IRS has identified other high risk
compliance areas such as promoters of tax schemes, misusers of
trusts and offshore accounts, and under-reporting of tax by
higher income individuals. The average EITC credit is estimated
to be only $1,660 while the average dollar-level fraud by those
upper income individual is obviously much higher. Do you really
believe that focusing $100 million on EITC is how the taxpayer
gets the biggest bang for their buck?
Mr. Wenzel. Our intent is to make sure that we continue to
devote a significant amount of our resources, as I mentioned in
our budget proposal for 2004, to address the other areas that
you just mentioned. But I also would say that we feel that the
$100 million is appropriate because almost one-third of the
program right now, $9 billion, is going out to individuals that
are not entitled to the EITC. Based on trending, that percent
may continue to increase unless we try to do something like the
pre-certification. That is a real concern on our part as far as
how a significant tax credit program like the EITC where
already a large proportion, the money is going to the wrong
individuals.
Senator Murray. You have estimated that almost one-third of
the EITC claims in tax year 1999 should not have been paid due
to taxpayer errors. But that percentage does not take into
account the changes that were made in the 2001 tax act.
Shouldn't that figure be lower now?
Mr. Wenzel. We have not been able to validate that. We
should, based on this national research program that we just
recently have gone out and done, a random audit, receive
information to verify what you just mentioned; however, the
information will not be available until next year, about this
time, to see what the results were.
Senator Murray. So we will not know whether it is still
that high until a year from now?
Mr. Wenzel. It is true, we are----
Senator Murray. We made changes in the 2001 tax act that
should have reduced that. But you are basing what you want to
do now back on what happened before we did that act.
Mr. Wenzel. That is correct. That is the latest information
that we have that we cited. And despite our efforts in terms of
how we approached this in the past, we have not been successful
to reverse this trend.
Senator Murray. But shouldn't we wait until we get a more
accurate estimate of what occurred with the 2001 tax act before
implementing this kind of regime that could cause a lot of
disruption among many taxpayers?
Mr. Wenzel. Senator, our assessment of this is that we
really need it--we could not wait any longer. We needed to go
ahead and try this pre-certification as a better way to
identify and stop the 30 percent and reduce it significantly.
Senator Murray. Your documentation actually indicates that
one reason that we have a high error rate is because taxpayers
are confused about many of the complex EITC rules. What steps
have you taken to simplify these rules so that we can avoid
taxpayer confusion?
Mr. Wenzel. We continue to get the input from our National
Taxpayer Advocate and her advocates around the country. We
ourselves at the IRS are always trying to learn from interested
outside groups that give us input, to try to make sure that--
the example I gave, in terms of this current effort, is to come
up with a form that is easily understood, simplified, as much
as possible, including the instructions, so people are not
confused.
Senator Murray. Mr. Chairman, I would just say that if we
do pre-certification and confuse people even more, then we are
doing a real disservice to people who actually should be
getting the EITC for very good reasons that we have set out
before. So I think we have to be very careful. If we have
confusing rules now and we add more confusing rules, I do not
think it is very fair to low income taxpayers.
Mr. Wenzel. Senator, just in terms of the $100 million I
just--and I am sure you are aware of this, but I just wanted to
point out that of the $100 million, we asked for about 650
FTEs. About 20 percent of the 650 FTEs will be spent on
educating and informing again, trying to reach out and make
sure that people know they are entitled to the EITC and trying
to clarify for them any misunderstanding. So it is not all
totally devoted towards the enforcement side.
Senator Murray. Thank you, Mr. Chairman.
IRS FREE FILE INITIATIVE
Senator Shelby. I want to go back to the free filing and so
forth. Are there two separate systems here? One, the free file
alliance is free for qualifying taxpayers.
Mr. Wenzel. Yes.
Senator Shelby. And by that, do you have to have a certain
income to qualify?
Mr. Wenzel. Yes, what is referred to as the adjusted gross
income, Mr. Chairman. But what these different sites offer in
the way of----
Senator Shelby. What would that be before they could----
Mr. Wenzel. It varies by site. But when you add them all
up, at least 68 percent of all taxpayers that would want to
avail themselves of one of the 17 sites will have the
opportunity to free file. It is not 100 percent.
Senator Shelby. In other words, you have to have a certain
income before you can go to these sites. So it is not for all
taxpayers.
Mr. Wenzel. Not right now.
Senator Shelby. Do you expect it to be for all taxpayers?
Mr. Wenzel. This is a first-year effort.
Senator Shelby. So you are trying.
Mr. Wenzel. We are trying. It is truly a pilot. The
response has been tremendous; 2.1 million people to date have
used this option that would not have otherwise. They have had
the opportunity to come in and file a return at no cost.
Senator Shelby. Now the e-file partners are the only
entities that the IRS allows to file tax returns; is that
correct?
Mr. Wenzel. Through that site, yes. Through IRS.gov, yes.
Senator Shelby. I wanted to clear that up.
CUSTOMER SERVICE
The IRS' budget request proposes to reduce the individual
call service workforce. Some of us are concerned about the
implications of the workforce reduction in the individual call
service area. The IRS has come a long way in terms of customer
service in the years since I chaired this committee last, and
we are concerned that a reduction of this size will have a
negative impact on the provision of customer service to
individual taxpayers.
Mr. Wenzel. We fully agree with you in that regard, Mr.
Chairman. We do not want to step back and reduce the service,
what we have been able to achieve. Just to give you one
measurement----
Senator Shelby. Because, in a sense, if you reduce the
service it will reduce your efficiency, will it not?
Mr. Wenzel. We have a responsibility to provide the best
products and services to citizens of the United States, and one
of the ways we do that is through our telephone call centers.
We want to make sure we maintain and continue to improve the
way we do business. We have been successful in improving the
efficiency of the telephone operations, particularly in the
last 12 months, but our performance goals, as you would review
them, would continue to show that we want to improve in all
areas, including the quality of the responses we give and also
the level of service that we offer on our telephones. We do not
intend to step back.
CAMPUS CONSOLIDATION
Senator Shelby. Electronic filing again. We do not want to
get away from that, I think. As more returns are filed
electronically, what is the impact on IRS staffing in
facilities? It has to go down.
Mr. Wenzel. Absolutely. Because of the 53 million that I
mentioned earlier, as a result of that, we are closing one of
what we call our submission processing centers.
Senator Shelby. Brookhaven service center?
Mr. Wenzel. That is the Brookhaven service center, yes. We
have eight, what we call individual tax return submission
processing centers, and two for just business returns. As of
September 30th of this year, not too many months from now, the
submission processing operation in Brookhaven will shut down
completely and we will go to seven, with plans as electronic
filing continue----
Senator Shelby. What savings will you realize by closing
this facility?
Mr. Wenzel. Significant savings.
Senator Shelby. How will the savings be used?
Mr. Wenzel. We hope in terms of reinvesting back into the
IRS to put the savings into our customer service, into
enforcement.
Senator Shelby. What formula or criteria did you use to
determine which centers to close and the order in which to
close the centers?
Mr. Wenzel. I would be happy to share that with you and
your staff, Mr. Chairman, but things like labor and rent
savings, the impact on----
Senator Shelby. Just management positions basically?
Mr. Wenzel. Yes. A whole list of criteria that we came up
with.
Senator Shelby. Okay, we would be interested in seeing it.
Since all taxpayers are still not filing their taxes
electronically, are there plans to upgrade the paper returns
processing system?
Mr. Wenzel. We are always looking for ways to continue to
improve every part of the IRS' operation. The submission
processing paper side has been in business for a long time, and
even though it has been around for a long time, we have made
substantial improvements, and we continue to realize efficiency
savings. We will continue to look for additional efficiency
savings.
BUSINESS SYSTEMS MODERNIZATION
Senator Shelby. The IRS has developed an expenditure plan
for Congressional approval detailing how funds are to be spent
before the funds can be released. The key component of systems
modernization is the customer account data engine (CADE), and
it is scheduled to be released in June or July of this year. It
has experienced numerous delays. Will CADE be rolled out as
scheduled, and will it offer improved service to taxpayers?
Mr. Wenzel. This is, of any major business systems
modernization project that we have, the most significant
project because what it does is completely overhaul our master
file. Right now we expect that the first iteration of CADE will
be available to us later this year, around July and August.
What that is, basically as I mentioned, is the first phase of--
--
Senator Shelby. Master file, tell me what you mean.
Mr. Wenzel. Master file is every individual, business,
exempt organization, employee plans----
Senator Shelby. The whole matrix?
Mr. Wenzel. Everything, in terms of individuals and
businesses that are housed, currently, on a very outdated
system. So it is very sophisticated, very difficult. The PRIME
contractors that we have, some of the best companies in the
world, realize the challenges here. They are the ones that are
doing this work for us, as you know. Right now we have regular
meetings and the goal is to stay with the schedule of July or
August to have the first version of CADE delivered.
Senator Shelby. What steps are you taking at IRS to ensure
that the business operating divisions are adequately prepared
to accept and operate and support these modernize systems?
Mr. Wenzel. That is a very essential part because all of
this modernization, when you talk about modernization----
Senator Shelby. It means nothing without that, doesn't it?
Mr. Wenzel. It means nothing without having your people
come along and understand what the new systems offer. So there
is a training part, awareness part, all of that is so
important, and it is integral to this whole effort.
Senator Shelby. You do not want to purchase software and no
one knows how to operate it.
Mr. Wenzel. That is exactly right. We have seen that happen
in some other agencies, and we are not going to let that happen
here at the IRS.
Senator Shelby. GAO has reported that IRS has made progress
in implementing modernization management controls and
capabilities, certain BSM management capabilities have not been
fully implemented they say. GAO reiterated prior
recommendations that the IRS correct modernization management
weaknesses. We know you have made progress from when I used to
benchmark it.
What is IRS's plan and schedule for addressing the GAO's
recommendations, including implementing effective procedures
for validating contractor development, cost and schedule
estimates?
Mr. Wenzel. We have done a number of things based on the
input from the GAO's oversight of the IRS, and also our
inspector general's oversight of the BSM program. One of the
things that we have done is this year, fiscal year 2003, we
have slowed down or eliminated some of the projects that we
thought we were going to undertake, and really focused on CADE
and some of the other critical programs, which has helped us
immeasurably.
We have also met with the PRIME contractor and entered into
an understanding that a lot of the programs in the future will
be cost performance-based type of compensation, rather than
just continuing to write a check. That's the expectation; the
work will be based on a set cost price or possibly a
performance-based price, so there is accountability going back
to the PRIME contractor.
The third thing that the PRIME contractor has done, based
on their further awareness of the challenges that these efforts
offer, is beefed up their experts, their expertise,
particularly their senior leadership of the contract, and have
brought in some individuals that really understand this better
and know how to manage it better, and to work with the IRS
leadership in terms of making sure we deliver on BSM this time.
OFFERS IN COMPROMISE
Senator Shelby. The Offer in Compromise, this initiative
has allowed the IRS to reduce the backlog of cases and all new
cases are to be processed at one of two centralized sites, and
only those offers that cannot be completed there are sent to
field offices for resolution. Concerns exist because the
program has been costly to operate in comparison to the return
on the investment. Have the new initiatives enabled IRS to make
the program more cost efficient? What measures are used to make
your assessment?
Mr. Wenzel. What we have done is, in two sites, as you
mention, one in Brookhaven and one in Memphis, added a total of
600 employees, roughly 300 in each of the locations. They are
lower-graded employees. Obviously, to start this up we had to
go through an extensive training program for the 600 employees.
Now their skill level has really reached the point where they
have become quite productive, and we are able to screen out and
work in those sites some of the real easy offer in compromises
where we do not have to make a one-on-one contact with a
revenue officer who is much higher-graded, where there is
travel time involved and so forth.
So our key measurement is what you might expect in terms of
the quality of the work performed, the efficiency of the work
performed. We feel, at this point in time, that now that we
have gone through this learning curve, that our decision to go
to that kind of an operation is going to really pay the overall
benefits that we initially expected.
SECURITY
Senator Shelby. Information security. News reports that the
IRS has not done a good job in making sure that contractors
receive appropriate background checks. There have been problems
with lock box employee guards and even bomb-sniffing dogs that
really could not detect explosives. What is the IRS doing to
address these problems? Can these problems have an impact on
the safety of IRS employees as well as on the security of the
taxpayer data? It is important to have a safe place to work.
Mr. Wenzel. Mr. Chairman, if there is a number one priority
at the Internal Revenue Service, it is to ensure the safety of
our 100,000 employees around the country. We take seriously and
welcome the reviews that have been conducted by the GAO and the
inspector general for the IRS, who has also provided us ongoing
feedback on things like you just mentioned, in terms of the
contract employees. We have responded to those and taken the
necessary actions to correct that problem, so that the
background checks are done of contract employees, and do the
follow-up reviews and make sure it does not recur again.
Ever since September 11th of 2001, we have an ongoing site
here in Washington, D.C. with the Inspector General, where
cooperatively we are looking at every aspect of physical
security in every one of our 795 offices around the country to
try to ensure the safety of our employees.
ADDITIONAL COMMITTEE QUESTIONS
Senator Shelby. That is good to hear.
We appreciate your appearance here today. We will continue
to work with you and we believe that we have to measure the
expenditures of the taxpayer and you are in a position to set
the ground rules.
Mr. Wenzel. Mr. Chairman, thank you for your oversight and
support that you provide to the Internal Revenue Service.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Richard C. Shelby
GENERAL
Question. Why is IRS requesting additional staffing in fiscal year
2004, when the positions granted in fiscal year 2003 have not been
filled?
Answer. The IRS requested additional funding in fiscal year 2003
for 1,179 FTE to improve customer service and compliance and meet
workload increases. However, before we published the fiscal year 2004
budget, a number of unfunded and unanticipated costs arose that reduced
the funding available for hiring these additional staff. Since over 70
percent of the IRS Operating budget consists of salaries and benefits,
any unanticipated costs we must pay requires the reduction of labor
costs (i.e., FTE).
For example, the fiscal year 2002 annual pay raise of 4.6 percent
cost an additional $43 million above the 3.6 percent budgeted amount.
The IRS had also expected savings resulting from legislative proposals
for postage and the Financial Management Service (FMS) levy that
Congress did not pass that required us to fund an additional $23
million. The unfunded postage increase raised our postage costs by $22
million. Moreover, an unfunded increase in security costs resulting
from the 9/11 tragedy cost the agency an additional $20 million. These
changes and others amounted to $170 million in unexpected, unfunded
costs mandatory to meet our mission.
In addition, the extended Continuing Resolution for fiscal year
2003 limited our funding to the fiscal year 2002 level until the
appropriation was passed in early 2003. That restriction forced the IRS
to concentrate available funds on ensuring a good filing season and
prevented the execution of hiring plans. Despite these setbacks, the
IRS needs the additional funding in fiscal year 2004 to continue to
build the staff necessary to address the enforcement problems that
ensure that all taxpayers pay their fair share of taxes.
Question. What formula did IRS use to determine which Service
Center to close and what cost savings if any, are derived from this
action?
Answer. In the past, all ten IRS submissions processing centers
processed returns from both the Individual Taxpayers (IMF) and Business
Taxpayers (BMF). Prior to our reorganization the ten centers were
identical to each other. Each center processed IMF and BMF returns.
Each center also handled Taxpayer Accounts (correspondence/telephones)
and Compliance programs for both IMF and BMF. While this was
successful, we felt we could improve our Business results, and be more
responsive to the Customer/Taxpayers by specializing our organization
structure based on our customers. We based the initial IMF
Consolidation Strategy of these centers around Wage and Investment
(W&I), Small Business/Self Employed (SB/SE), Large and Mid-Size
Business (LMSB) and Tax Exempt and Government Entities (TE/GE) customer
segments. As a result of this reorganization, we reorganized the ten
Processing Campuses into eight W&I and two SB/SE Submission (Return)
Processing Centers.
With the increased emphasis on Electronic Filing we have designed a
detailed business plan to reduce the number of Processing Centers from
eight W&I sites to, eventually, two. This is several years in the
future, but this plan will reduce the number of centers every couple of
years, providing the public continues to switch from filing paper to
electronic returns.
We used economies of scale, labor market factors and real estate
costs, as well as the criteria listed below, to determine the order of
consolidation of the sites:
--A Program Optimization Model using site specific volumetric and
production rates,
--Campus specific Return on Investment for real estate expenditures
associated with Submission Processing,
--Detailed potential severance costs associated with a Submission
Processing consolidation,
--Qualitative factors such as, operational feasibility,
infrastructure and work force impacts.
As Electronic Filing increases and paper returns decrease,
consolidation of Submission Processing campuses will result in savings.
The IRS' intent is to reinvest these savings to maximize program
opportunities in other areas. While there is not a final figure for the
Brookhaven Submission Processing consolidation, the initial cost
savings projection was approximately $50 million. The projected savings
at the Memphis Service Center consist of both Real Estate and Salary
costs and are currently projected to be $12.5 million dollars for the
period 2004 through 2006. We project an annual cost avoidance of $9.5
million dollars a year starting in 2007. It is too soon to project the
cost savings for each center beyond Memphis at this time.
ELECTRONIC FILING
Question. Reports state that the 2002 filing season has been
successful with the implementation of e-filing. There should be some
cost savings from this program; can you identify savings generated
because of this initiative?
Answer. During fiscal year 2002, IRS estimates that the savings
generated from e-file were $9.995 million. Savings for fiscal year 2003
are estimated to be $10.369 million. Savings are computed as the costs
that would have been incurred for processing the decreased number of
paper returns, reduced by the costs of processing them as e-file
returns.
Question. The IRS contracted with the Free File Alliance, to
provide free online tax preparation and filing services for at least 60
percent of all taxpayers through the IRS Website. Since the 2002 filing
date has passed, do you think the Free File Alliance was a success?
What changes if any, would you make to this process for the next filing
season?
Answer. We did not contract, but rather established and are
executing a public-private partnership agreement with the Free File
Alliance, LLC.
As of May 31, 2003, the IRS has received over 2.77 million returns
through the 17 companies participating with the Free File Alliance.
This figure represents over 23 percent of all returns filed online with
the IRS (11.7 million). These free tax preparation and e-filing
services will continue to be available to taxpayers through October 15,
2003 on the irs.gov web site. Deemed a tremendous success by Treasury,
OMB and IRS, the Free File initiative exceeded expectations for the
program. Based on the volume of returns received through Alliance
members and the relatively small number of comments/concerns sent to
the IRS, the Free File initiative was very well received by taxpayers.
The IRS and the Free File Alliance are assessing all feedback and
impact of the program on both industry and the IRS. Completion of this
process will determine appropriate refinements for the 2004 filing
season.
Question. Electronic filing has a number of discrepancies
pertaining to e-filing. Explain how free e-filing works? How can an
individual qualify for free e-filing?
Answer. In November of 2001, the Office of Management Budget's
(OMB) Quicksilver Task Force established 24 e-government initiatives as
part of the President's Management Agenda. The task force designed
these initiatives to improve government to government, government to
business, and government to citizen electronic capabilities. One
initiative, EZ Tax Filing (now known as Free File) instructed the IRS
to provide free online tax return preparation and electronic filing
services to taxpayers. To accomplish this objective, the IRS began
working in partnership with the tax software industry to develop a
solution. The result was a precedent-setting agreement between the
government (IRS) and private sector (Free File Alliance, LLC, a group
of tax software companies, managed by the Council for the Electronic
Revenue Communication Advancement (CERCA)), that requires tax software
companies to provide free online tax preparation and electronic filing
services to eligible taxpayers. This agreement requires Alliance
members to provide free tax return preparation and electronic filing
services to a significant portion of the taxpaying population (at least
60 percent or 78 million taxpayers) through April 15, 2003. Many of
these free services will be available for taxpayers with extensions
through October 15, 2003. These free services were launched to the
public on January 16, 2003 and are being promoted by the IRS and are
accessible at www.irs.gov.
The following describes how a taxpayer can participate with Free
File:
Determine eligibility.--Upon arrival to the Free File page within
irs.gov, the taxpayer must determine his or her eligibility for using a
particular company's free service. This eligibility can be determined
by two methods: the taxpayer may browse the complete listing of
Alliance members and their free services; or the taxpayer can use a
``questionnaire'' application (i.e., Free File Wizard) designed to help
identify those free services for which they may qualify. Each Alliance
member's company name is identified and a simple description of the
criteria for using their free service is provided. For interested
taxpayers, each Alliance member's company or product name is linked to
additional information about the company and/or services.
Link to free services.--Upon determining eligibility, the taxpayer
can link directly to that Alliance member's free service by clicking on
the Alliance member's ``Start Now'' link. Upon doing so, taxpayers are
notified they are leaving the irs.gov web site and are entering the
Alliance member's web site.
Prepare and File Income Tax Return.--At the Alliance member's web
site, the taxpayer can use the member's online software to prepare and
e-file his or her income tax return using proprietary processes and
systems. Once complete, the member transmits the taxpayer's return
information to the IRS through the established e-file system. Upon
receipt, IRS computers check the return information for errors or
missing information and send the taxpayer notification of return
acceptance or rejection through the Alliance member. Taxpayers will
receive notification from the Alliance member.
[Note.--Each Alliance member has specific qualifying criteria for
its free service. For the 2003 filing season, the members based these
requirements on factors such as age, adjusted gross income, State
residency, military status, or eligibility to file a Form 1040EZ or
claim the Earned Income Tax Credit. Taxpayers who met these
requirements can use that member's online software to prepare and e-
file their Federal tax return for free. An Alliance member's qualifying
criteria may change for the 2004 filing season.]
Question. When the business system modernization of IRS is
complete, will all taxpayers be able to file their taxes by e-filing or
file on-line from the privacy of one's own home? If not, why not?
Answer. Currently, over 99 percent of all tax returns can be e-
filed from home computers or by using an authorized provider. The IRS
is systematically removing the last few barriers to e-file to open
eligibility to the remaining taxpaying population. However, IRS'
Business Systems Modernization program does not have plans to offer
direct on-line filing. RRA 98 directed the IRS to work cooperatively
with the industry to promote electronic filing. Additionally, the IRS
believes that private industry, given its established expertise and
experience in electronic tax preparation, has a proven track record in
providing the best technology and services available. As such, the IRS
entered into an agreement with the private industry (Free File
Alliance), to provide free online tax filing and preparation services
to at least 60 percent of the taxpaying population. These free services
were offered, during the 2003 filing season, by 17 different companies
and were accessible through IRS' web site (irs.gov). The IRS is
continuing to work with industry partners to provide opportunities and
solutions that will encourage taxpayers to file their tax returns
electronically.
MODERNIZATION
Question. What contributed to the delays in the projects in the
Business Systems Modernization spending plan submitted to Congress?
Answer. The IRS is modernizing one of the largest and most complex
information systems in the world. Since the creation of the IRS in its
current form in the 1950s, our mission has evolved, and the volume and
complexity of our operations have mushroomed. Our tax system
modernization initiative faces several challenges:
--Complex, ever-changing tax laws,
--Extremely high volumes,
--Over 130 million individual taxpayers,
--Over 6 million business taxpayers,
--200 million returns,
--$2.1 trillion in receipts, $1.5 trillion in electronic payments,
--Tax refunds totaling over $190 billion,
--1.5 billion information documents,
--52 million electronically filed returns,
--19.2 million combined Federal/State returns,
--Inputs with wide-variation in content ranging from few to many
fields of various lengths,
--Seasonal processing with extreme variations in processing loads,
--Hundreds of legacy applications,
--Transaction rates on the order of billions per year and storage
measured in the tens of terabytes (trillions of bytes).
Since the Business System Modernization (BSM) effort began, the BSM
program office and PRIME contractor have struggled to implement defined
and repeatable processes that are necessary for effective and efficient
systems development. Due to the complexity of the BSM projects, these
management processes have required time to become established. Once all
management processes are in place, and as they mature, the program will
run closer to cost and schedule estimates and our capacity to initiate
additional deliverables will also increase. Also, we have addressed
many of the recommendations made by GAO, such as prudently slowing some
projects and deferring new ones when management capacity is inadequate,
to proceed with an acceptable risk level.
The IRS' systems are woefully obsolete and inefficient for an
organization so critically dependent on technology. We are saddled with
a collection of computer systems developed over a 35-year period. The
most important systems that maintain all taxpayer records were
developed in the 1960s. Additional cost and schedule delays arise from
the challenge of programming interfaces with these historical systems,
which cannot easily share information with the modernized systems.
Initial project budgets and delivery timelines are based on long
term plans and strategy and may be developed years before the project
start date. As the projects move through the lifecycle and as
requirements become fully understood, we have adjusted most project
estimates and schedules to reflect the enormous complexity of the
systems. Legislative changes in the tax code also impact costs and
schedules.
Both the IRS and the PRIME contractor have underestimated the
enormous size and complexity of the BSM effort. We are engaged in a
comprehensive process improvement initiative to enhance our
effectiveness in validating cost and schedule estimates. This includes
working with the PRIME contractor to develop and deploy best practice
estimating capabilities consistent with Carnegie Mellon University's
Software Engineering Institute (SEI), as recommended by GAO. Once all
management processes are in place and as they mature, the program will
run closer to cost and schedule estimates and our capacity to initiate
additional deliverables will also increase.
In addition, given the important juncture we've reached with the
first important deliverable for CADE, we have decided to have an
outside group of experts take an independent look at the program and
report back to us by the end of this summer. We have not yet identified
who will conduct this study but expect to do so in the next few weeks.
No work will stop while the review is underway, but this is a good time
to assess progress, project risk and whether any midcourse corrections
are needed.
Question. Customer Account Data Engine (CADE) is the most critical
of the components in the modernization process. When CADE goes live
this year will it be able to process all individual and business
accounts?
Answer. The first release of CADE will go live later this summer.
CADE will begin to process individual returns this year. The system
will not, however, process business returns this year. The individual
tax returns that CADE will begin to process will only be 1040EZ
returns, paper and electronic, for single filers who either fully paid
or have a refund due. CADE's first release will not include EITC filers
and filers with prior issues. The number of returns included in this
first release will be approximately 6 million. Although this is a
relatively modest beginning, this first release of CADE contains much
of the highly complex infrastructure to support later releases.
CADE will be deployed over 6 years in five releases, each related
to a specific taxpayer segment. Each release will deliver functionality
to support increasingly complex filing scenarios. At the conclusion of
Release 5, CADE will have replaced the Individual Master Files.
Subsequent releases of CADE will eventually replace the Business Master
Files and Non-Master Files.
Because CADE is one of the most complex projects in the world, we
are moving forward carefully based upon positive results from the
rigorous testing process, as well as cost and capacity considerations.
PRIVATE COLLECTION AGENCIES
Question. What guidelines does the IRS have in place to protect
taxpayer's privacy, when and if the tax collection process is
contracted to private collection agencies?
Answer. Under the Administration's proposal, taxpayer protections
provided by the Internal Revenue Code (Code), IRS procedures, and other
applicable laws, including those relating to taxpayer privacy, would be
fully applicable to private collection agencies (PCAs). The taxpayer
protections incorporated in the Administration's proposal have been
reviewed thoroughly, including consultations with the National Taxpayer
Advocate. The National Taxpayer Advocate would have a continuing role
in ensuring that taxpayer protections are maintained under this
program.
Sections 6103(n) and 7431(a)(2) of the Internal Revenue Code
currently permit a taxpayer to pursue legal action against any person
who is permitted to receive tax returns and return information for
purposes of assisting in tax administration, but who unlawfully
inspects or discloses that information. Criminal penalties also may be
imposed under I.R.C. Sec. Sec. 7213, 7213A. These provisions would
apply to PCAs. The Administration's proposal would require annual
reports outlining the safeguards in place at the PCAs to protect
taxpayer confidentiality and PCA compliance with the taxpayer
confidentiality provisions.
PCA employees would receive extensive training on taxpayer rights
and privacy protections. The IRS' oversight processes, which would
include an on-site presence, live and tape monitoring of communications
with taxpayers, periodic audits, and performance evaluations, would
ensure that taxpayer rights and privacy are fully protected.
PCAs would be required to maintain a dedicated secure physical
space with approved access controls to ensure protection of taxpayer
data. The IRS would evaluate the integrity of a PCA's computer system
to ensure that appropriate access controls are in place to protect
taxpayer data. To protect against browsing of taxpayer information,
PCAs' systems would be required to maintain a log of accesses to
taxpayer information, which would be audited periodically by the IRS.
On-site security reviews would be performed to ensure that PCAs
implement appropriate access controls to segregated areas where IRS
work would be performed. Periodic security audits would be performed to
ensure the PCAs maintain ongoing data and physical security.
Question. A pilot project was tried previously, using private
collection agencies and it was not a success; what new information do
you have that would indicate that this process will work now?
Answer. The Administration's proposal reflects the lessons learned
from the pilot program. The primary issues affecting the success of the
pilot program, and the manner in which those issues are addressed by
this proposal, are set out below.
--Implementation Period.--The IRS was required to implement, almost
from scratch, the pilot program within the year of the
appropriation legislation--i.e., within 10 months of enactment.
In contrast, planning for this proposal was begun well over a
year ago and has involved discussions between the IRS, the
Treasury Department, the Office of the National Taxpayer
Advocate, the Department of Justice, and prospective
contractors. Moreover, even once authorizing legislation is
enacted, this proposal contemplates that additional time would
be required before the PCA program could begin. This additional
time allows the IRS to ensure that the business processes,
security and oversight measures, and taxpayer protections are
brought on-line and fully tested before the program begins.
--Funding.--The pilot program effectively was funded out of IRS
appropriations and involved the assignment to PCAs of a range
of cases. IRS employees can exercise discretion and enforcement
authority which cannot be delegated to a PCA. IRS employees,
therefore, should be more effective, compared to a PCA
employee, at collecting a range of outstanding tax obligations.
Thus, PCAs in the pilot program were destined to be judged as
inferior to IRS employees over such a range of cases. In
contrast, however, this proposal would involve the careful
screening of cases to ensure that only the most appropriate
ones are assigned to PCAs so that PCAs can act effectively and
efficiently with respect to these liabilities. The
Administration's proposal also involves PCAs supplementing, and
not displacing, existing IRS resources. Accordingly, the
program would add to the net revenue collected.
--Processing and Communications.--At the time of the pilot program,
IRS computer and communication systems were not adequate for
the processing, delivery, and updating of liabilities being
handled by the PCAs. These processing and communications issues
already are being addressed to ensure that all functions are
performed timely in support of the program.
--Selection of Accounts.--The pilot program required the IRS to place
accounts where the IRS had previously made attempts to collect
the monies owed. Consequently, the pilot program involved the
referral of many outstanding liabilities to PCAs that did not
have realistic collection potential. This resulted in wasted
effort by both the PCA and the IRS. Under the Administration's
proposal, the IRS would focus on ensuring that the outstanding
liabilities that are referred to PCAs are those that not only
are within the authority of the PCA to resolve but also
represent cases with a sufficient likelihood of payment if a
PCA, in fact, were to handle the liability.
--Taxpayer Information.--The pilot program overly restricted the
amount of information that could be provided to PCAs for
purposes of collecting outstanding liabilities. As a result,
many cases had to be returned by the PCAs to the IRS due to the
PCAs' inability to respond to often straightforward questions
about a taxpayer's liability. Under the Administration's
proposal, PCAs would have access to specific information
regarding an outstanding tax liability (e.g., type of tax, tax
years affected, dates of assessment, whether the assessment is
based on a taxpayer's own balance due return or an IRS notice,
prior payments, and application of prior payments) in order to
answer basic, but important, questions that a taxpayer may have
regarding the liability. The taxpayer information that would be
provided to PCAs would be strictly limited to the information
required for the collection of the specific tax liability at
issue. PCAs would not receive, for instance, information
regarding a taxpayer's total or adjusted income, sources of
income, results of IRS examinations, delinquency history for
liabilities not being handled by the PCA, or employer
information. All existing restrictions imposed by section 6103
of the Code would apply to the PCAs, and taxpayers would have
the right to assert a claim against PCA employees who violate
those protections.
--Contract Structure.--The pilot program involved a fixed-price
contract with incentive payments. The Administration's proposal
would involve a competitive, fee-for-service, performance-
based, incentive contract structure. The performance evaluation
would be based on a balanced scorecard that would look to
quality of service, taxpayer satisfaction, and case resolution,
in addition to collection results. The allocation of accounts
among the PCAs participating in the program would be based on
this performance evaluation, thereby providing a further
incentive for PCAs to respect all taxpayer rights and
protections. This compensation structure is modeled on the
successful FMS and Department of Education contracts.
--Oversight.--The Administration's proposal would involve extensive
oversight of the PCAs participating in the program, including
direct, on-site monitoring. This oversight would ensure that
procedures are followed, and that any issues are identified and
resolved early.
______
Questions Submitted by Senator Ted Stevens
PUBLIC EMPLOYEES RETIREMENT SYSTEMS RULING
Question. In 2001, the Alaska State legislature passed a bill
sponsored by Senator Rick Halsford (S.B. 145) which created the Village
Public Safety Officer Program. The bill mandates Village Public Safety
Officers are eligible to become a member of the Public Employees'
Retirement Systems (PERS) under as 39.35. The IRS is considering the
inclusion of Village Public Safety Officers in PERS, however they have
not yet rendered a decision. Until the IRS makes a decision, S.B. 145
can't be implemented. In March, I wrote a letter to the IRS requesting
a response regarding the status of the IRS' ruling on the inclusion of
Village Public Safety Officers in PERS. No response has been received
to this date. When can I expect to receive a written response regarding
the inclusion of Village Public Safety Officers in PERS, or can you
address this question right now?
Answer. The ruling request is under active consideration. Because
positions taken by the Pension Benefit Guaranty Corporation and the
Department of Labor can be affected by IRS rulings concerning the
status of a plan as a governmental plan, we informally coordinate these
rulings with those agencies on a taxpayer anonymous basis. We cannot
disclose or otherwise make a draft taxpayer ruling available while we
are deliberating on a ruling, whether redacted or not. Once the ruling
is issued, with the taxpayer's permission we can make a redacted copy
available to you.
We plan to forward a redacted copy of our ruling to the
aforementioned agencies for their comments in mid-June. We expect their
response within 30 days, and, assuming they concur with our proposed
ruling or have no concerns or comments that require follow-up, we will
issue our decision within a week of receipt.
EXCISE TAX CALCULATION
Question. You have stated one of the goals of the IRS is to ensure
that top quality service is provided to each taxpayer through fair and
uniform application of the law. It has come to my attention that an
Alaskan company called Hawaiian Vacation has been using a handbook
published by the Airlines Reporting Corporation to calculate its excise
tax for flights from Alaska to Hawaii. According to the handbook, the
route from Anchorage to Honolulu is subject to a 4.9 percent tax. The
tax table has been used in the airline industry for over 30 years, and
during this time, the IRS has not taken issue with the ARC handbook
tables.
Recently, the IRS has disputes the use of the ARC handbook and has
proposed the tax calculation for the flight between Anchorage and
Honolulu is 10.45 percent. Obviously, the IRS' calculation affects
Alaskans because this is a tax paid by passengers. In the past, has the
IRS rejected the use of the ARC handbook to determine tax rates? If so,
name the circumstances in which the use of the ARC handbook was
rejected. Will you provide the code section that prohibits the use of
the ARC handbook when computing excise taxes?
Answer. Industry tables are useful tools in the calculation of the
taxable and excludable mileage for air transportation and are normally
published by an entity having no Form 720 filing requirement. Neither
the Internal Revenue Code nor Treasury Regulations prohibit or
authorize the specific use of industry tables when calculating the
excise tax due on taxable air transportation to or from Alaska or
Hawaii. However, the underlying formulas and calculations to generate
these industry tables must be in compliance with IRC section 4262(b)
and applicable regulations.
The Airline Reporting Corporation (ARC) has published tables used
in the airline reservation industry for over 30 years. Based on
historical files, it appears that the IRS had reviewed tables revised
by the Air Transport Association of America (ATA) in 1969. The tables
concerned tax rate ratios for 29 TRANSPAC gateway cities. Although the
specific mileages were not authenticated, the IRS stated the formula
appeared reasonable, with an understanding that the computations were
made using the method set forth in Reg, Sec. 49.4262(b)-1(c).
Recently, we determined that the airline reservation industry
tables currently include tax rate ratios for over 700 cities to Alaska
and Hawaii. It appears they may not conform to the method set forth in
the regulations and revenue rulings. For example, all cities in Alaska
have the same rate to Hawaii, as well as all cities in an area east
from Vermont to Nova Scotia, regardless of the miles involved. In
addition, established flight patterns over Kodiak Island in Alaska and
Catalina Island in southern California, which are within the United
States and taxable, are possibly not considered in the rate tables.
Although IRC Sec. 6103 prevents the discussion of specific
taxpayers and their returns, we are able to provide general tax
information in response to these questions. The industry table
calculates the taxable mileage portion of a trip from Anchorage to
Hawaii to be 4.9 percent of the total miles. The 7.5 percent Federal
Excise Tax rate would then be applicable to 4.9 percent of the amount
paid for the ticket. Computing the specific mileage when normal flight
patterns to Hawaii are over Kodiak Island, the taxable portion of the
mileage is more closely reflected at 10.45 percent of the total
mileage, because the flight passes over a point that is U.S. territory.
This is a broad-based issue that impacts airlines, charter
companies, and travel agencies who have a Form 720 filing requirement,
as well as all taxpayers who travel to and from Alaska and Hawaii. In
an effort to treat all taxpayers fairly and equally, we hope to resolve
the issue with a uniform application of the law. We have agreed to meet
with the industry and determine whether this issue can be addressed on
a broad scale. We will be including excise, industry and Counsel
specialists in this matter to come to a final determination as to the
Service's position. There are several options open to pursue this,
including Industry Issue Resolution, Tax Advisory Memorandum, or Field
Technical Guidance. We will determine the appropriate format and a path
of resolution after a review of the underlying information and a
discussion with industry.
______
Questions Submitted by Senator Patty Murray
WILL THE IRS TRY TO INCREASE EARNED INCOME TAX CREDIT (EITC)
PARTICIPATION?
Question. Mr. Wenzel, you stated that you intend to develop your
numerical performance goal in no more than 45 days.
Please forward to me your goal and an accompanying detailed
description of how you intend to achieve this goal no later than May
26th.
Answer. We are currently developing a methodology to identify the
EITC participation rate to allow us to establish a targeted goal. We
will provide this goal and accompanying detail by the end of June, as
we discussed with your staff.
Question. Some Federal agencies have used paid television
advertising in English and Spanish as a method of publicizing their
message. For example, the National Highway Traffic Safety
Administration spent $10 million to buy primetime advertising utilizing
volunteer celebrities to get out its enforcement message on seat belts
with great success.
How much does the IRS plan to spend on paid advertising on radio
and television in order to boost participation in the EITC program?
Answer. The IRS does not normally use paid advertising for EITC.
EITC is promoted primarily through free Public Service Announcements
(PSA). In 2003, IRS spent approximately $1.5 million for development
and distribution of PSAs (TV, radio, and print media) in both Spanish
and English and other related outreach materials. For 2004, we are
beginning to plan an EITC awareness and understanding promotion
strategy that will focus on encouraging workers eligible for EITC to
claim it, while reducing erroneous payments. We have budgeted
approximately $1.5 million for this effort.
Question. Will you be using volunteer celebrities to get people's
attention?
Answer. In years past, celebrities have appeared in IRS PSAs from
time to time. However, we do not actively seek celebrity participation.
Celebrities can pose a public relations risk if the celebrity's
positive image changes in the future.
Question. You are asking for an additional $100 million for the
EITC program. We are told that this funding will go both for your pre-
certification effort and to enhance participation.
Precisely what percentage of the $100 million will go toward pre-
certification versus outreach efforts?
Answer. Of the $100.2 million:
--$16.2 million is allocated to the Qualifying Child Verification
initiative,
--$13.0 million is allocated for Communications and Outreach,
--$11.1 million is allocated to the Filing Status and Income
Misreporting initiatives,
--$7.1 million is for operations management,
--$9.9 million is allocated to phone support, and
--$4.5 million is allocated for support from a variety of areas,
including Field Assistance, Taxpayer Advocate Service and
Appeals.
The vast majority of the remainder ($38.4 million) is allocated to
developing business and technological infrastructure. A description of
the technology infrastructure that we are developing or acquiring is
provided in Appendix I.
should the irs be allowed to use private collection agencies (pcas) to
HELP COLLECT DELINQUENT TAX DEBTS?
Question. Mr. Wenzel, your agency is seeking legislative authority
to use private collection agencies to help collect delinquent tax
debts. IRS documentation states that the IRS would be required to
closely monitor private collection agencies' activities and
performance, including the protection of taxpayer rights. This is
particularly important because PCAs would be compensated out of the
revenue collected through their activities.
Please explain in detail the precise steps that would be in place
to ensure that vigilant oversight would be conducted on PCA activities?
Answer. The IRS would establish an oversight group with
responsibility for managing case referrals, monitoring and evaluating
PCA performance, monitoring interactions with taxpayers, and reviewing
and approving PCA invoices. The oversight group would be required to
monitor a statistically valid number of taxpayer contacts by each PCA
to evaluate taxpayer treatment and adherence to IRS approved
procedures. A manual review of PCA activity on taxpayer accounts would
be performed to ensure compliance with approved IRS procedures and
overall quality of case handling. A full on-site audit of each PCA by
the IRS oversight group would be performed on a regular basis and would
be in addition to ongoing quality-control and taxpayer protection
monitoring.
The PCA would be responsible for ensuring that each employee who
has access to taxpayer account information has completed the
appropriate background investigation and non-disclosure forms. The PCA
would be required to submit verification of the required background
investigation and copies of the non-disclosure forms to the IRS at
least 20 days before the employee is permitted to access taxpayer
information. In addition, the IRS would adopt tracking procedures
developed during the 1996-97 pilot program to ensure that no PCA
employee would be granted access to the IRS work site or taxpayer data
until he/she successfully completed a satisfactory background
determination. These procedures were very successful during the pilot.
The IRS' oversight of PCAs would be similar in many respects to the
IRS' oversight of its own employees. For example, the IRS audit system
logs for indications of improper accesses to taxpayer information. The
IRS also performs oversight of employee work for quality and
appropriateness of taxpayer interactions.
PCAs would be required to provide a large amount of information to
the IRS, as well as access to various systems, to facilitate IRS
oversight. This would include:
--detailed Operational Management Information Systems (MIS) reports,
--telephone Service Level reports,
--audits of employee access to IRS taxpayer data,
--access to PCA collection system for auditing purposes,
--remote telephone monitoring access to authorized IRS personnel,
--PCA employee tracking information,
--PCA employee quality review monitoring evaluations,
--PCA Operational Plans, and
--PCA Business Continuation Plans.
To make certain the IRS promptly hears, evaluates and addresses
taxpayer complaints, a PCA would be required to provide to taxpayers,
orally and in writing, information on how to report a complaint with
the IRS. Any complaint received by the IRS from a taxpayer would
immediately be provided to the PCA. If a PCA were to receive a
complaint directly from the taxpayer, the PCA would be required to
immediately forward the complaint to the IRS.
Upon receipt of a complaint from the IRS or directly from a
taxpayer, a PCA would be required to immediately cease collection
activity on the account in question and provide to the IRS, by the
close of business on the following business day, a copy of its records
on the account and any other information relevant to the complaint. The
PCA would not be permitted to resume collection activity on the account
until IRS resolved the problem and provided the PCA written
authorization to resume work. Failure by the PCA to cease collection
activity on the account would result in IRS recalling the account from
the PCA and, if appropriate, the termination of the PCA's contract.
A PCA also would be required to investigate the complaint and
provide a complete report to the IRS within 10 business days of
receiving the complaint. The report would include a description of all
actions taken to resolve the situation and steps put in place to ensure
there are no future occurrences of similar situations.
If a complaint is validated, the PCA would be required to remove
the offending employee from the IRS account and take all necessary
steps to ensure the employee no longer has any access to taxpayer
information. In addition, the PCA's bonus and inventory would be
reduced, and the PCA would be subject to a penalty. The IRS could
choose to suspend all contract activity for the PCA either permanently
or until the IRS has determined, at its discretion, that the PCA had
taken appropriate corrective actions to prevent further complaints.\1\
The IRS' determination that a complaint was valid would not be subject
to review.
---------------------------------------------------------------------------
\1\ In determining whether to suspend a contract, the IRS would
consider the severity and frequency of valid complaints for a PCA
(whether related to one or more employees).
---------------------------------------------------------------------------
If a potential statutory violation is identified, the IRS also
would notify the Treasury Inspector General for Tax Administration
(TIGTA). TIGTA may investigate the complaint, depending on the
circumstances and seriousness of the complaint. If TIGTA initiates a
formal investigation of the complaint, the PCA would be required to
cooperate fully with the investigation and coordinate its own
management efforts with the IRS and TIGTA. TIGTA would provide a report
of its investigation to the IRS Contracting Officer after concluding
the investigation.
Question. What mechanisms would be in place to ensure that taxpayer
rights are protected and private data is accurately secured in the use
of private collection agencies?
Answer. Under the Administration's proposal, taxpayer protections
provided by the Internal Revenue Code (Code), IRS procedures, and other
applicable laws, including those relating to taxpayer privacy, would be
fully applicable to private collection agencies (PCAs). The taxpayer
protections incorporated in the Administration's proposal have been
reviewed thoroughly, including consultations with the National Taxpayer
Advocate. The National Taxpayer Advocate would have a continuing role
in ensuring that taxpayer protections are maintained under this
program.
Sections 6103(n) and 7431(a)(2) of the Internal Revenue Code
currently permit a taxpayer to pursue legal action against any person
who is permitted to receive tax returns and return information for
purposes of assisting in tax administration, but who unlawfully
inspects or discloses that information. Criminal penalties also may be
imposed under I.R.C. Sec. Sec. 7213, 7213A. These provisions would
apply to PCAs. The Administration's proposal would require annual
reports outlining the safeguards in place at the PCAs to protect
taxpayer confidentiality and PCA compliance with the taxpayer
confidentiality provisions.
PCA employees would receive extensive training on taxpayer rights
and privacy protections. The IRS' oversight processes, which would
include an on-site presence, live and tape monitoring of communications
with taxpayers, periodic audits, and performance evaluations, would
ensure that taxpayer rights and privacy are fully protected.
PCAs would be required to maintain a dedicated secure physical
space with approved access controls to ensure protection of taxpayer
data. The IRS would evaluate the integrity of a PCA's computer system
to ensure that appropriate access controls are in place to protect
taxpayer data. To protect against browsing of taxpayer information,
PCAs' systems would be required to maintain a log of accesses to
taxpayer information, which would be audited periodically by the IRS.
On-site security reviews would be performed to ensure that PCAs
implement appropriate access controls to segregated areas where IRS
work would be performed. Periodic security audits would be performed to
ensure the PCAs maintain ongoing data and physical security.
Question. To what degree will the backgrounds of contractor
employees be investigated?
Answer. The IRS, following Internal Revenue Manual (IRM) procedures
and using input from the National Background Investigations Center
(NBIC) would determine the degree of background investigation required
in accordance with the risk associated with the job function performed
and the taxpayer information being provided to the PCAs. We anticipate
PCA employees would undergo a moderate level of background
investigation, which includes a criminal activity check, a tax
compliance check and verification of personal references.
Question. The Administration is supporting legislation to allow
private collection agencies to collect tax debt and be paid out of the
proceeds of their collection efforts.
Isn't this in conflict with the 1998 IRS reform legislation that
specifically prohibits IRS employees or managers from being evaluated
on the amount of taxes they collect?
Answer. Fully consistent with Section 1204 of the IRS Reform and
Restructuring Act, the IRS' contracts with PCAs would prohibit a PCA
from evaluating a PCA employee based on quotas or collection results
with respect to Federal tax debts serviced for the IRS. Moreover, these
contracts would require that PCA employee evaluations include taxpayer
service as a factor.
The PCAs themselves would be evaluated based on a balanced measure
scorecard that would reflect quality of service, taxpayer satisfaction,
employee satisfaction and case resolution, in addition to collection
results. A PCA therefore will be judged at its, and its employees'
effectiveness, at resolving outstanding accounts and, where
appropriate, effecting payment of outstanding tax liabilities.
PCAs would have a very strong incentive to fully respect taxpayer
rights and protections, including privacy rights. Validated taxpayer
complaints and deficiencies identified during the IRS' monitoring and
audit of a PCAs would result in significant monetary penalties for the
PCA. In addition, the PCA's future allocation of cases would be
significantly impacted. Simply put, a PCA that does not fully respect
taxpayer rights and protections would soon find itself with a small to
nonexistent role in the program.
Question. Congress was concerned that evaluating employees on tax
collection success could promote overly aggressive collection
techniques. Even if the individual contract employees are not evaluated
on how much they bring in, they may be concerned that they won't have a
job unless they are bringing in money.
Doesn't this conflict with the provisions of the 1998 IRS reform
legislation?
Answer. The Administration's proposal combines carefully restricted
PCA activities, careful and continuous oversight, and significant short
and long-term penalties and incentives to ensure PCAs and their
employees will fully respect taxpayer rights and protections.
PCAs would focus on taxpayers who are likely to pay their
outstanding tax liabilities, either in full or in installments, if they
were located and contacted. These are functions that do not require the
exercise of discretion and which would not involve enforcement actions.
PCAs may be provided by the IRS with a specific statement that can
either be sent or delivered verbally to taxpayers regarding the
benefits of paying an outstanding tax liability, and the potential
consequences of failing to do so. PCAs would be prohibited from
threatening or intimidating taxpayers, or otherwise suggesting that
enforcement action will or may be taken if a taxpayer does not pay the
liability. In no case would a PCA be permitted to take enforcement
action against a taxpayer.
As described in previous responses, PCAs and their employees would
be subject to extensive oversight and audit. A violation by a PCA of a
taxpayer protection provided by the Internal Revenue Code (Code), IRS
procedures, or other applicable laws, including those relating to
taxpayer privacy, would have real short-term and long-term consequences
to the PCA and its employee, including, where appropriate, contract
termination.
Question. I understand that under current law, if an IRS employee
misuses taxpayer information, the injured taxpayer can recover damages
from the U.S. government.
Would that be the case with private contractors?
Answer. The existing protections against unauthorized disclosure of
returns or return information would apply to PCAs and their employees.
Sections 6103(n) and 7431(a)(2) of the Internal Revenue Code permit a
taxpayer to pursue legal action against any person who is permitted to
receive tax returns and return information for purposes of assisting
with tax administration, but who unlawfully inspects or discloses that
information. Criminal penalties also may be imposed under I.R.C. 7213
and 7231A.
Question. IRS employees are routinely charged with frivolous claims
of misconduct by noncompliant taxpayers. These charges are investigated
by IRS or the Treasury Inspector General for Tax Administration.
Who would do the investigating and who would pay the cost of
investigations of charges against contract employees?
Answer. The process generally would be similar. The IRS would
establish an oversight group with responsibility for managing case
referrals, monitoring and evaluating PCA performance, monitoring
interactions with taxpayers, and reviewing and approving PCA invoices.
The oversight group would be required to monitor a statistically valid
number of taxpayer contacts by each PCA to evaluate taxpayer treatment
and adherence to IRS approved procedures. A manual review of PCA
activity on taxpayer accounts would be performed to ensure compliance
with approved IRS procedures and overall quality of case handling. A
full on-site audit of each PCA by the IRS oversight group would be
performed on a regular basis and would be in addition to ongoing
quality-control and taxpayer protection monitoring.
The PCA would be responsible for ensuring that each employee who
has access to taxpayer account information has completed the
appropriate background investigation and non-disclosure forms. The PCA
would be required to submit verification of the required background
investigation and copies of the non-disclosure forms to the IRS at
least 20 days before the employee is permitted to access taxpayer
information. In addition, the IRS would adopt tracking procedures
developed during the 1996-97 pilot program to ensure that no PCA
employee would be granted access to the IRS work site or taxpayer data
until he/she successfully completed a satisfactory background
determination. These procedures were very successful during the pilot.
The IRS' oversight of PCAs would be similar in many respects to the
IRS' oversight of its own employees. For example, the IRS audit system
logs for indications of improper accesses to taxpayer information. The
IRS also performs oversight of employee work for quality and
appropriateness of taxpayer interactions.
PCAs would be required to provide a large amount of information to
the IRS, as well as access to various systems, to facilitate IRS
oversight. This would include:
--detailed Operational Management Information Systems (MIS) reports,
--telephone Service Level reports,
--audits of employee access to IRS taxpayer data,
--access to PCA collection system for auditing purposes,
--remote telephone monitoring access to authorized IRS personnel,
--PCA employee tracking information,
--PCA employee quality review monitoring evaluations,
--PCA Operational Plans, and
--PCA Business Continuation Plans.
To make certain the IRS promptly hears, evaluates and addresses
taxpayer complaints, a PCA would be required to provide to taxpayers,
orally and in writing, information on how to report a complaint with
the IRS. Any complaint received by the IRS from a taxpayer would
immediately be provided to the PCA. If a PCA were to receive a
complaint directly from the taxpayer, the PCA would be required to
immediately forward the complaint to the IRS.
Upon receipt of a complaint from the IRS or directly from a
taxpayer, a PCA would be required to immediately cease collection
activity on the account in question and provide to the IRS, by the
close of business on the following business day, a copy of its records
on the account and any other information relevant to the complaint. The
PCA would not be permitted to resume collection activity on the account
until IRS resolved the problem and provided the PCA written
authorization to resume work. Failure by the PCA to cease collection
activity on the account would result in IRS recalling the account from
the PCA and, if appropriate, the termination of the PCA's contract.
A PCA also would be required to investigate the complaint and
provide a complete report to the IRS within 10 business days of
receiving the complaint. The report would include a description of all
actions taken to resolve the situation and steps put in place to ensure
there are no future occurrences of similar situations.
If a complaint is validated, the PCA would be required to remove
the offending employee from the IRS account and take all necessary
steps to ensure the employee no longer has any access to taxpayer
information. In addition, the PCA's bonus and inventory would be
reduced, and the PCA would be subject to a penalty. The IRS could
choose to suspend all contract activity for the PCA either permanently
or until the IRS has determined, at its discretion, that the PCA had
taken appropriate corrective actions to prevent further complaints.\2\
The IRS' determination that a complaint was valid would not be subject
to review.
---------------------------------------------------------------------------
\2\ In determining whether to suspend a contract, the IRS would
consider the severity and frequency of valid complaints for a PCA
(whether related to one or more employees).
---------------------------------------------------------------------------
If a potential statutory violation is identified, the IRS also
would notify the Treasury Inspector General for Tax Administration
(TIGTA). TIGTA may investigate the complaint, depending on the
circumstances and seriousness of the complaint. If TIGTA initiates a
formal investigation of the complaint, the PCA would be required to
cooperate fully with the investigation and coordinate its own
management efforts with the IRS and TIGTA. TIGTA would provide a report
of its investigation to the IRS Contracting Officer after concluding
the investigation.
The IRS would pay for an initial number of the background
investigations (75), and the PCA would bear the cost for any additional
background investigations after the first 75.
Question. How would IRS decide which cases to give to contractors?
Answer. The IRS is currently evaluating the cases that would be
referred to PCAs. In general, the cases the IRS would refer to PCAs are
cases where the taxpayer has a reasonable likelihood of paying the
outstanding tax liability if contacted by telephone. These cases would
include situations where a taxpayer has filed a return indicating an
amount of tax due but has not sent in full payment of that amount (so-
called ``balance-due'' taxpayers). These cases also would include
situations where the taxpayer has made three or more voluntary payments
of tax that the IRS has assessed (e.g., after having failed to file a
return or report all income received). The IRS would not refer cases
for which there is any indication that enforcement action would be
required to collect the tax liabilities or cases in which the taxpayer
disputes the amount of the liability or the existence of the liability.
The IRS anticipates that it initially would refer only cases
relating to the Form 1040 series of returns, i.e., individual
taxpayers. These cases also would include tax liabilities of Small
Business/Self-Employed (SB/SE) taxpayers and sole proprietors who file
a Form 1040 with a Schedule C, E, or F. Although the IRS would use PCAs
to help address both new cases as well as those cases that currently
are not to be addressed due to resource and collection priorities, the
IRS does not intend to refer cases that are over 6 years old.
The IRS is currently evaluating the potential inventory of cases
that may be appropriate for referral. The IRS is developing more
detailed screening criteria to eliminate cases likely to result in a
referral back to the IRS or that otherwise would have a low probability
of collection by the PCA. In addition, the IRS is examining whether
commercially available credit data could assist in identifying and
prioritizing the potential inventory for PCA placement.
Question. Wasn't funding to analyze which cases could be given to
contractors cut in this year's budget?
Answer. Collection Contract Support (CCS) was initially part of the
Filing & Payment Compliance (F&PC) Modernization project. Although this
project is now on hold, the IRS has identified fiscal year 2003 funding
for critical needs, including analysis and development of predictive
models that will place the appropriate accounts with PCAs should
legislation be enacted. We have engaged an industry leader in the
credit and risk management scoring process to develop these models for
use with CCS.
While the empirical models that are envisioned for F&PC are
ultimately desirable for the modernized IRS, the commercially available
models presently planned for use in CCS will provide valuable insight
to the IRS on which accounts can be best resolved in the PCA
environment.
HAS THE IRS IMPROVED ITS CUSTOMER SERVICE?
Question. For the 2002 filing season and so far in this year's
filing season, taxpayers have received correct responses to questions
approximately 85 percent of the time.
What is the IRS doing to improve this rate?
Answer. The IRS utilizes several methods to continually address
quality issues.
--The IRS monitors error data from the Centralized Quality Review
System on a daily basis and provides ongoing feedback about top
errors to frontline employees. The Centralized Quality Review
system is conducting in-depth analysis of fiscal year 2003
Filing Season data to make recommendations on correcting
problem areas.
--Frontline managers and local review staffs continually listen to
the responses given to customers on the toll free telephone
lines to ensure responses are correct and complete and to
provide performance feedback to frontline employees.
--The IRS is working continually to improve tools used by frontline
employees to respond to customer inquiries. These tools include
the Service Wide Electronic Research Program, the Electronic
Accounts Resolution Guide, and the Tax Law Probe and Response
Guide.
--Employees responding to tax law inquiries are specialized in their
respective topics and tested before being permitted to take
live calls.
The IRS has accumulated data from each toll-free site on challenges
faced during the fiscal year 2003 filing season and actions taken to
overcome these challenges. This information is being used to plan for
fiscal year 2004 and beyond to eliminate barriers to providing world-
class customer service.
Field Assistance initiated several actions to improve the accuracy
of responses given to taxpayers who visit Taxpayer Assistance Centers
(TAC). Some of the actions are:
--Monitor Employee Performance.--TAC managers are monitoring 12 tax
law counter contacts for each technical employee during the
year. At least six of the contacts will be monitored during the
filing season. To place the monitoring commitment into the
proper context, Field Assistance had 1521 permanent and 335
seasonal and permanent part time employees as of March 2003.
Considering that tax law represents only 10 percent of the
total workload and the geographic dispersion of our TACs this
is a significant number of reviews.
--Employee Counseling.--Counseling is provided when we identify an
improper referral to a publication. We follow up with education
and role playing to demonstrate proper use of the Publication
Method. The Publication Method is a technique to ``walk'' a
taxpayer through a publication to cover all appropriate probing
questions and illustrates the correct answer to his/her
question.
--Training Assessment Battery (TAB).--TAB will be administered to all
employees and managers to identify skill levels and training
needs. The TAB includes four modules that align directly with
the four-stage training curriculum for Tax Resolution
Representatives (TRRs).
--Employee Certification Process.--We have completed the first round
of employee certifications. The certification process requires
employees to correctly answer three out of three questions on
four tax law topics (social security benefits, education
credit, earned income tax credit and dependents). Employees
will only be allowed to answer taxpayers' questions on topics
for which they have been certified.
--Anonymous Managerial Visits.--The sample plan requires 30 anonymous
visits monthly per Area. Results of the visits are provided to
the employee's manager within one business day for follow-up
for potential quality improvement.
--Anonymous Headquarters Quality Assurance Visits.--Our Headquarters
Quality Assurance staff is required to make monthly anonymous
visits to the TACs. Results of the visits are also provided to
the employees' managers.
--Error Trend Reports.--Issued by Headquarters Quality Assurance
staff when we identify errors. Areas are required to follow up
on the errors identified and take appropriate actions to
improve the accuracy of responses given to taxpayers who visit
the TACs.
Question. How accurate are the answers supplied by employees using
the IRS toll-free help phone lines?
Answer. Using fiscal year 2003 cumulative as of May 23rd, for the
2003 filing season the accuracy rate for tax law is 82.25 percent and
accuracy rate for accounts is 88.11 percent.
Question. What is the result of reviews of the quality of walk-in
service to taxpayers at IRS Taxpayer Assistance Centers?
Answer. The results of Field Assistance quality reviews and
Treasury Inspector General for Tax Administration (TIGTA) reviews of
the quality of walk-in service at TAC's during fiscal year 2003 are:
Field Assistance Quality Review Results.--The cumulative accuracy
rate through April 2003 is 87 percent based on 840 questions asked
nationwide.
TIGTA Results.--The cumulative accuracy rate through April 2003 is
68 percent based on 445 questions asked. We disagree with including
referrals to publications and service denied responses in computing the
accuracy rate. When recomputed to reflect only answers that are
technically correct or incorrect, the cumulative accuracy rate is 73
percent. [Note.--The term ``service denied'' includes situations where
the IRS employee did not answer the taxpayer's question, did not refer
the taxpayer to a publication, another employee, the toll-free
telephone number or offer to prepare a written referral for the
question. The IRS employee may have told the taxpayer that no one was
available to answer their question and that they should come back the
next day.]
Question. Is there separate data available regarding the accuracy
of information given in response to inquiries pertaining to EITC?
Answer. Yes. Cumulative through April 2003, IRS has achieved an
81.4 percent accuracy on Earned Income Tax Credit (Tax Law) for
inquiries to our telephone assistors.
The accuracy results for EITC questions for our walk-in offices are
as follows:
Field Assistance Quality Review Results.--The cumulative accuracy
rate through April 2003 for EITC questions is 96 percent based on 69
questions asked nationwide.
TIGTA Results.--The cumulative accuracy rate through April 2003 for
EITC questions is 70 percent based on 96 EITC questions asked. As
stated above, we disagree with including referrals to publications and
service denied in computing the accuracy rate. When recomputed to
reflect only answers to EITC questions that are technically correct or
incorrect, the cumulative accuracy rate for EITC questions is 79
percent.
IRS MODERNIZATION
Question. It seems that for more than a decade, IRS has been
modernizing its computer systems. Obviously, this has been a challenge.
Why has it taken so long and why is it not completed? Despite
improvements, the major modernization projects continue to experience
significant delays, cost increases, management difficulties, and
reductions in deliverables.
Answer. The IRS is modernizing one of the largest and most complex
information systems in the world. Since the creation of Internal
Revenue Service (IRS) in its current form in the 1950s, our mission has
evolved, and the volume and complexity of our operations have
mushroomed. Comparable to no other in the world today, our tax system
modernization initiative faces several challenges:
--Complex, ever-changing tax codes,
--Extremely high volumes,
--Over 130 million individual taxpayers,
--Over 6 million business taxpayers,
--200 million returns,
--$2.1 trillion receipts, $1.5 trillion in electronic payments,
--Tax refunds totaling over $190 billion,
--1.5 billion information documents,
--52 million electronically filed returns,
--19.2 million combined Federal/State returns,
--Input with wide-variation in content ranging from few to many
fields of various lengths,
--Seasonal processing with extreme variations in processing loads,
--Hundreds of legacy applications, and
--Transaction rates on the order of billions per year and storage
measured in the tens of terabytes (trillions of bytes).
As you know, past modernization attempts have yielded small
improvements, but have been largely unsuccessful. A critical question
moving forward was whether or not the IRS could learn from these
failures to become more successful at managing modernization. At the
direction of Congress and to maximize the likelihood of success, the
IRS awarded the PRIME contract to provide leadership in the development
of the IRS long-term vision of tax administration including; systems
integration and engineering, best practices in business process
reengineering and business solution, software acquisition/development
and program/project management capability.
Notwithstanding the complexity of our modernization effort, we are
experiencing the same challenges faced by private industry in
developing and deploying technology projects. The CHAOS report,
published by the Standish Group, evaluated the causes for success and
failure of technology projects. The Standish Group research shows a
staggering 31.1 percent of projects will be canceled before they ever
get completed. Further results indicate 52.7 percent of projects will
cost 189 percent of their original estimates. The Modernization
projects are realizing a success rate equal to or greater than the
success rate experienced by private industry.
The Modernization program is delivering real benefits for
taxpayers, tax practitioners and the IRS, and we are supporting an
aggressive deliverable schedule. In addition to the accomplishments
realized by project releases in fiscal year 2001 and 2002 discussed in
the response to question 39d, planned deliverables for fiscal year 2003
include functionality for Internet Employer Identification Number
(EIN), Customer Account Data Engine (CADE), Human Resources (HR)
Connect and e-Services.
Initial project budgets and delivery timelines are based upon the
long term visioning and strategy and sometimes developed several years
before the project start date. As the projects move through the
lifecycle and requirements become fully understood, most project
estimates and schedules have been adjusted to reflect the enormous
complexity of the systems. Additional costs and schedule delays also
arise from legislative changes and the need for the modernized systems
to interface with the existing legacy systems.
We are engaged in a comprehensive process improvement initiative to
enhance our effectiveness in validating cost and schedule estimates.
This includes working with the PRIME contractor to develop and deploy
best practice estimating capabilities consistent with Carnegie Mellon
University's Software Engineering Institute (SEI), as recommended by
GAO. Following the present rollout of cost and schedule estimating
enhancements our focus will transition to ensuring increased accuracy
and reliability of estimates. Once all management processes are in
place, and as these mature, the program will run closer to cost and
schedule estimates and our capacity to initiate additional deliverables
will also increase.
The modernization effort is a major challenge. As the GAO noted in
its January assessment, modernization remains a high risk area. It
stated, ``The scope and complexity of the program are growing--the
challenge for the IRS is to make sure the pace of systems acquisition
projects does not exceed the agency's ability to manage them
effectively.'' Given the important juncture we have reached with the
first important deliverable for CADE, and the need to ensure future
success of the program, we have decided to have an outside group of
experts take an independent look at the program and report back to us
by the end of this summer. We have not yet identified who will conduct
this study but expect to do so in the next few weeks. No work will stop
while the review is underway, but this is a good time to assess
progress, project risk and whether any midcourse corrections are
needed.
Finally, because of the importance of successfully achieving
modernization, the new Commissioner recently appointed a new position,
the Deputy Commissioner for Operations Support, who will supervise the
Chief Financial Officer, Chief Information Officer, the Chief Human
Capital Officer, Agency Wide Shared Services and the Service's IT and
physical security operations. The Deputy Commissioner for Operations
Support will own the modernization program and drive productivity
across the organization in order to improve service to taxpayers.
IRS FINANCIAL MANAGEMENT
Question. The Acting Inspector General has found that IRS lacks, on
an ongoing basis, the timely, accurate, and useful information needed
to make informed management decisions.
How do you respond to this charge?
Answer. The IRS is in the process of implementing the Integrated
Financial System, a Joint Financial Management Improvement Program
(JFMIP)-certified, commercial off-the-shelf software application that
addresses the legislative requirements for the IRS in support of the
financial and revenue accounting, property and procurement processes.
Release 1 is scheduled for agency-wide deployment in October 1, 2003.
This release will:
--Improve the capability to meet internal/external requirements
related to management controls and financial reporting,
including cost accounting;
--Improve the timeliness, quality, and utility of administrative
activity data provided to IRS managers, as well as to central
agencies, so they can make effective business decisions; and
--Address several Remediation Plan action items, and address GAO
concerns regarding lack of integrated financial management
systems at IRS.
With the implementation of IFS Release 1, the IRS expects to
dramatically improve the timeliness, accuracy, and usability of the
information required to make informed management decisions.
______
Questions Submitted by Senator Barbara A. Mikulski
IRS ON PRIVATIZING TAX COLLECTION
Question. The Administration is supporting legislation to allow
private collection agencies to collect tax debt and be paid out of the
proceeds of their collection efforts. This seems to me to be in
conflict with the 1998 IRS reform legislation that specifically
prohibits IRS employees or managers from being evaluated on the amount
of taxes they collect. Congress felt that evaluating employees on tax
collection success promoted overly aggressive collection techniques.
Even if the individual contract employees are not evaluated on how much
they bring in, they will know that they won't have a job unless they
are bringing in money. Isn't that in conflict with the provisions of
the 1998 IRS reform legislation?
Answer. The Administration's proposal combines carefully restricted
PCA activities, careful and continuous oversight, and significant short
and long-term penalties to ensure PCAs and their employees will fully
respect taxpayer rights and protections. Fully consistent with Section
1204 of the IRS Reform and Restructuring Act, the IRS' contracts with
PCAs would prohibit a PCA from evaluating a PCA employee based on
quotas or collection results with respect to Federal tax debts serviced
for the IRS. Moreover, these contracts would require that PCA employee
evaluations include taxpayer service as a factor.
PCAs would focus on taxpayers who are likely to pay their
outstanding tax liabilities, either in full or in installments, if they
were located and contacted. These are functions that do not require the
exercise of discretion and which would not involve enforcement actions.
PCAs may be provided by the IRS with a specific statement that can
either be sent or delivered verbally to taxpayers regarding the
benefits of paying an outstanding tax liability, and the potential
consequences of failing to do so. PCAs would be prohibited from
threatening or intimidating taxpayers, or otherwise suggesting that
enforcement action will or may be taken if a taxpayer does not pay the
liability. In no case would a PCA be permitted to take enforcement
action against a taxpayer.
A violation by a PCA of a taxpayer protection provided by the
Internal Revenue Code (Code), IRS procedures, or other applicable laws,
including those relating to taxpayer privacy, would have real short-
term and long-term consequences to the PCA and its employee, including,
where appropriate, contract termination.
Question. It's my understanding that under current law if an IRS
employee misuses taxpayer information the injured taxpayer can recover
damages from the U.S. government? Would that be the case with private
contractors?
Answer. The existing protections against unauthorized disclosure of
returns or return information in would apply to PCAs and their
employees. Sections 6103(n) and 7431(a)(2) of the Internal Revenue Code
permit a taxpayer to pursue legal action against any person who is
permitted to receive tax returns and return information for purposes of
assisting with tax administration, but who unlawfully inspects or
discloses that information. Criminal penalties also may be imposed
under I.R.C. 7213 and 7231A.
Question. IRS employees are routinely charged with frivolous claims
of misconduct by noncompliant taxpayers. These charges are investigated
by IRS or the Treasury Inspector General for Tax Administration. Who
would do the investigating and who would pay the cost of investigations
of charges against contract employees?
Answer. The process generally would be similar. The IRS would
establish an oversight group with responsibility for managing case
referrals, monitoring and evaluating PCA performance, monitoring
interactions with taxpayers, and reviewing and approving PCA invoices.
The oversight group would be required to monitor a statistically valid
number of taxpayer contacts by each PCA to evaluate taxpayer treatment
and adherence to IRS approved procedures. A manual review of PCA
activity on taxpayer accounts would be performed to ensure compliance
with approved IRS procedures and overall quality of case handling. A
full on-site audit of each PCA by the IRS oversight group would be
performed on a regular basis and would be in addition to ongoing
quality-control and taxpayer protection monitoring.
The PCA would be responsible for ensuring that each employee who
has access to taxpayer account information has completed the
appropriate background investigation and non-disclosure forms. The PCA
would be required to submit verification of the required background
investigation and copies of the non-disclosure forms to the IRS at
least 20 days before the employee is permitted to access taxpayer
information. In addition, the IRS would adopt tracking procedures
developed during the 1996-97 pilot program to ensure that no PCA
employee would be granted access to the IRS work site or taxpayer data,
and even then only limited access, until he/she successfully completed
a satisfactory background determination. These procedures were very
successful during the pilot.
The IRS' oversight of PCAs would be similar in many respects to the
IRS' oversight of its own employees. For example, the IRS audit system
logs for indications of improper accesses to taxpayer information. The
IRS also performs oversight of employee work for quality and
appropriateness of taxpayer interactions.
PCAs would be required to provide a large amount of information to
the IRS, as well as access to various systems, to facilitate IRS
oversight. This would include:
--detailed Operational Management Information Systems (MIS) reports,
--telephone Service Level reports,
--audits of employee access to IRS taxpayer data,
--access to PCA collection system for auditing purposes,
--remote telephone monitoring access to authorized IRS personnel,
--PCA employee tracking information,
--PCA employee quality review monitoring evaluations,
--PCA Operational Plans, and
--PCA Business Continuation Plans.
To make certain the IRS promptly hears, evaluates and addresses
taxpayer complaints, a PCA would be required to provide to taxpayers,
orally and in writing, information on how to report a complaint with
the IRS. Any complaint received by the IRS from a taxpayer would
immediately be provided to the PCA. If a PCA were to receive a
complaint directly from the taxpayer, the PCA would be required to
immediately forward the complaint to the IRS.
Upon receipt of a complaint from the IRS or directly from a
taxpayer, a PCA would be required to immediately cease collection
activity on the account in question and provide to the IRS, by the
close of business on the following business day, a copy of its records
on the account and any other information relevant to the complaint. The
PCA would not be permitted to resume collection activity on the account
until IRS resolved the problem and provided the PCA written
authorization to resume work. Failure by the PCA to cease collection
activity on the account would result in IRS recalling the account from
the PCA and, if appropriate, the termination of the PCAs contract.
A PCA also would be required to investigate the complaint and
provide a complete report to the IRS within 10 business days of
receiving the complaint. The report would include a description of all
actions taken to resolve the situation and steps put in place to ensure
there are no future occurrences of similar situations.
If a complaint is validated, the PCA would be required to remove
the offending employee from the IRS account and take all necessary
steps to ensure the employee no longer has any access to taxpayer
information. In addition, the PCA's bonus and inventory would be
reduced, and the PCA would be subject to a penalty. The IRS could
choose to suspend all contract activity for the PCA either permanently
or until the IRS has determined, at its discretion, that the PCA had
taken appropriate corrective actions to prevent further complaints.\3\
The IRS' determination that a complaint was valid would not be subject
to review.
---------------------------------------------------------------------------
\3\ In determining whether to suspend a contract, the IRS would
consider the severity and frequency of valid complaints for a PCA
(whether related to one or more employees).
---------------------------------------------------------------------------
If a potential statutory violation is identified, the IRS also
would notify the Treasury Inspector General for Tax Administration
(TIGTA). TIGTA may investigate the complaint, depending on the
circumstances and seriousness of the complaint. If TIGTA initiates a
formal investigation of the complaint, the PCA would be required to
cooperate fully with the investigation and coordinate its own
management efforts with the IRS and TIGTA. TIGTA would provide a report
of its investigation to the IRS Contracting Officer after concluding
the investigation.
The IRS would pay for an initial number of the background
investigations (75), and the PCA would bear the cost for any additional
background investigations after the first 75.
Question. How would the IRS decide which cases to give to
contractors? Wasn't funding to analyze which cases could be given to
contractors cut in this year's budget?
Answer. The IRS is currently evaluating the cases that would be
referred to PCAs. In general, the cases the IRS would refer to PCAs are
cases where the taxpayer has a reasonable likelihood of paying the
outstanding tax liability if contacted by telephone. These cases would
include situations where a taxpayer has filed a return indicating an
amount of tax due but has not sent in full payment of that amount (so-
called ``balance-due'' taxpayers). These cases also would include
situations where the taxpayer has made three or more voluntary payments
of tax that the IRS has assessed (e.g., after having failed to file a
return or report all income received). The IRS would not refer cases
for which there is any indication that enforcement action would be
required to collect the tax liabilities or cases in which the taxpayer
disputes the amount of the liability or the existence of the liability.
The IRS anticipates that it initially would refer only cases
relating to the Form 1040 series of returns, i.e., individual
taxpayers. These cases also would include tax liabilities of Small
Business/Self-Employed (SB/SE) taxpayers and sole proprietors who file
a Form 1040 with a Schedule C, E, or F. Although the IRS would use PCAs
to help address both new cases as well as those cases that currently
are not to be addressed due to resource and collection priorities, the
IRS does not intend to refer cases that are over 6 years old.
Collection Contract Support (CCS) was initially part of the Filing
& Payment Compliance (F&PC) Modernization project. Although this
project is now on hold, the IRS has identified fiscal year 2003 funding
for critical needs, including analysis and development of predictive
models that will place the appropriate accounts with PCAs should
legislation be enacted. We have engaged an industry leader in the
credit and risk management scoring process to develop these models for
use with CCS.
While the empirical models that are envisioned for F&PC are
ultimately desirable for the modernized IRS, the commercially available
models presently planned for use in CCS will provide valuable insight
to the IRS on which accounts can be best resolved in the PCA
environment.
BUSINESS SYSTEMS MODERNIZATION
Question. I am concerned about the requested funding levels for the
IRS business systems modernization program. The budget request for this
year is just $429 million, about $21 million or 5 percent below the
initial fiscal year 2003 request and $79 million or 14 percent below
the level recommended by the IRS Oversight Board.
a. Are you committed to a robust Federal investment to continue the
business systems modernization program at IRS?
Answer. Yes. We firmly believe we are making progress on our
commitments, are leveraging our precious resources, and are managing
the considerable risk inherent in a program of the enormous size,
complexity, and sensitivity. The current BSM program funding level for
fiscal year 2003 is $407 million (including available appropriations
from previous years). The President's Budget proposes an increase to
$429 million in fiscal year 2004.
The $429 million enables us to provide a balanced program that
builds out essential infrastructure, delivers taxpayer value, improves
internal operations and is within our ability to manage and implement.
The BSM program has been steadily implementing management processes
based on best practices in cost and scheduling planning, configuration
management, risk management, management progress reporting, acquisition
management and others. We feel the management processes coupled with
our governance process will strike the proper balance between
delivering business value, building critical infrastructure, and
ensuring control and effectiveness. As the management processes mature,
the program will run closer to cost and schedule estimates.
In addition, the modernization effort is a major challenge. As the
GAO noted in its January assessment, modernization remains a high risk
area. It stated, ``The scope and complexity of the program are
growing--the challenge for the IRS is to make sure the pace of systems
acquisition projects does not exceed the agency's ability to manage
them effectively.''
Given this assessment and the important juncture we have reached
with the first important deliverable for CADE, we have decided to have
an outside group of experts take an independent look at the program and
report back to us by the end of this summer. We have not yet identified
who will conduct this study but expect to do so in the next few weeks.
No work will stop while the review is underway. But this is a good time
to assess progress, project risk and whether any midcourse corrections
are needed.
Question. b. What is the Administration's five-year run out for the
business systems modernization--both in the annual appropriations
request and the annual BSM program (expenditure plan) level?
Answer. In fiscal year 2001 we developed a Tax Administration
Vision and Strategy (TAVS) and an Internal Management Vision and
Strategy (IMVS) to guide the BSM program. TAVS and IMVS reflected our
priorities (the sequencing plan). Some critical projects like CADE were
already started, but future projects are generally chartered from the
sequencing plan that we developed as part of TAVS and IMVS. We also
developed an Enterprise Architecture (EA) that added significant
functional and technical detail to TAVS and IMVS. The EA includes an
Enterprise Transition Plan that further details the TAVS and IMVS
sequencing plan.
The request for $429 million was determined after extensive
analysis of: (1) the requirements for in-progress projects begun prior
to fiscal year 2004; (2) the TAVS and IMVS sequencing plan; (3) funding
the Custodial Accounting Project and Integrated Financial System to
correct material weaknesses in financial management; (4) improving IRS
e-gov functionality with e-Services and Modernized e-file; (5)
maintaining adequate management reserve; (6) the Business Systems
Management Office (BSMO) capacity to manage the program and projects;
and finally, (7) the ability of the business units to absorb new
software vis-a-vis training and implementation impacts. In requesting
the $429 million, we believe we have set a realistic funding level that
will allow us to continue the investments begun prior to fiscal year
2004 and initiate critically needed systems software and hardware for
business operations.
As the IRS moves forward in its modernization efforts, funding
requests will be developed after careful consideration of our long-term
strategy, the sequencing plan and the priorities in the President's
Management Agenda, as well as our ability to manage and absorb new
functionality and business processes.
Question. c. The program's development growth has generally been
sustained through a combination of annual appropriations and carryover
from prior year appropriations so that this year's (2003) program level
is $450 million (the $370 million appropriation + carryover from prior
years). I am concerned that prior year carryover funding will pretty
much be exhausted after 2003. So how can the BSM program--as it enters
into a critical period next year for a series of major projects--
maintain its momentum if the program level in 2004 actually drops below
the anticipated level for 2003?
Answer. The current BSM program funding level for fiscal year 2003
is $407 million, including carryover from prior years. The President's
Budget proposes an increase to $429 million in fiscal year 2004. The
requested funding level of $429 million will allow us to continue the
investments begun prior to fiscal year 2004 and initiate critically
needed systems software and hardware for business operations.
Question. d. OMB seems to be pushing expenditure of funds for this
program into more internal IRS information technology applications
rather than robustly funding the development of major activities that
benefit the four major IRS business units. Can you explain what you are
doing to guarantee that the products developed by the BSM are going to
be used by the IRS' business units?
Answer. Guiding the BSM Program is our Tax Administration Vision
and Strategy and Internal Management Vision and Strategy, both of which
are reflected in the BSM Enterprise Architecture. The business units
developed these during late 2002 and early 2001 and keep them current.
As we develop products based on the business priorities reflected
in our sequencing plan, we have management processes that deeply invest
the business units in leadership and ownership positions across the
life cycle. One example is our Executive Steering Committees (ESC),
which are chaired by the business unit. The Deputy Commissioner for
Large and Mid-Size Business LMSB heads the Filing and Processing
Management Sub-ESC and the Deputy CFO heads the Internal Management
Sub-ESC, for example.
Our integrated project teams have representation from all the
relevant affected business areas, including information technology, and
all key designated roles, such as the Requirements Director, are always
from the business units. There are many other examples of how bonded
the systems people and the business people are in this process, but
hopefully the examples above convey the flavor of what we are doing to
ensure deep business engagement and ownership from the outset.
Our programs to date have addressed improved tax administration,
internal management, and building technical infrastructure.
Establishing a new secure online infrastructure to support tax
administration applications like the very popular ``Where's My
Refund?'' is one achievement we cite with pride. We have delivered
several other tax administration applications (a new customer
communications system, a new system for tax computations for use by
LMSB revenue agents, and a new Internet Employer Identification Number
system) and one major internal management system (human resources).
This summer we will implement a new Internet-based system to enable
streamlined communications with tax practitioners, and the first
release of CADE, which will be the first step in replacing the old
master files with a modernized taxpayer account data system. This fall
we will implement two new internal management applications, a new core
financial system, replacing our current financial system, and a new
custodial accounting system. Next January, we will launch electronic
filing for large businesses and tax-exempt organizations.
As you can see, this represents an ambitious, but balanced (across
tax administration and internal management) portfolio.
Question. I am very supportive--as have the House and Senate
Appropriations Committees--of the efforts made to advance Business
Systems Modernization (BSM) by its systems integrator--the PRIME
Alliance. In fact, it was this Subcommittee in the fiscal year 1997
Treasury Appropriations bill that set the whole BSM/PRIME concept in
motion. I am concerned, however, about a couple of items and would like
your review of several matters.
a. Currently, about $50 million are spent each year on Tier B
projects that are designed to be the next generation of applications
for certain IRS business units, yet these funds are not controlled by
either BSM or the PRIME. I am concerned about the failure to make sure
that the right hand and the left hand are not only coordinated, but
marching in lock step with each other--something only settled by
putting these funds under the control of BSM and the PRIME. Can you
apprise the Subcommittee of your position on this concept and provide
for us a detailed idea of how we guarantee the kind of program
integration on IRS IT activities that are necessary for BSM to succeed?
Answer. The BSM Business Integration Office is responsible for
ensuring that strategically linked Tier B projects are under the BSM
governance structure. In this case the Sub-Executive Steering
Committees have oversight responsibility for Strategic Tier B projects
along with Tier A projects, thus insuring project integration. In
addition each modernization project contains a Transition to Support
Plan, which details Operations & Maintenance activities after the
modernized system is deployed.
These investments are not as large, dramatic or far reaching as the
BSM program. They are small-scale investments that provide bridge
systems until modernization arrives or, in some cases, are the
modernized end-state solutions. All investments or projects within this
portfolio are selected through the IRS' integrated prioritization
process. A major component of this prioritization and selection process
is a thorough engineering analysis to ensure that the proposed systems
are compliant with the modernized enterprise architecture and do not
duplicate what is being developed by the BSM program. This engineering
analysis also ensures that these projects will run on the modernized or
BSM infrastructure. And, finally, the engineering analysis checks for
duplication with legacy system enhancements.
In order to support continuation of modernization efforts the newly
appointed Deputy Commissioner for Operations Support will supervise the
CFO, CIO, the Chief Human Capital Officer, Agency Wide Shared Services
and the Service's IT and physical security operations. The Deputy
Commissioner for Operations Support will own the modernization program
and drive productivity across the organization in order to improve
service to taxpayers.
Question. b. I am also concerned that an increasing amount of the
funds appropriated for BSM are not flowing through the PRIME Alliance.
When Congress directed the IRS to initiate BSM in fiscal year 1997, we
were emphatic that a private sector integrator needed to be brought in
to do the job. Yet by bypassing the PRIME, and splintering BSM funds in
multiple directions, it appears the IRS--in the wake of Commissioner
Rossotti's departure--is trying to return to a position of itself being
the systems integrator. That is at odds with the original Congressional
intent for the program and President Bush's Management Agenda. What can
you do to make sure that we let the private sector serve as the systems
integrator for this program as was intended?
Answer. The table below was recently prepared for House
Congressional testimony. It shows the total amount of obligated funds
since we awarded the PRIME contract. Over the life of the contract the
PRIME has received approximately 75 percent of all obligated BSM funds.
During the last two full fiscal years, 2001 and 2002, the PRIME has
received approximately 76 percent of the obligations each year. Because
of the long Continuing Resolution and the recent approval of the
revised fiscal year 2003 Business Systems Modernization Expenditure
Plan, we do not yet have comparable fiscal year 2003 numbers available.
We do not believe that the numbers indicate that the share of funds
going to PRIME has decreased significantly. It is not the intention of
the IRS to move away from the Congressional intent of having the
private sector serve as systems integrator for the BSM program.
PRIME CONTRACTOR AND OTHER IRS SUPPORT CONTRACTORS
------------------------------------------------------------------------
BSM
-----------------------------------
Obligated Expended
------------------------------------------------------------------------
PRIME............................... $771,031,696 $634,725,415
MITRE............................... 52,801,406 49,440,693
Other............................... 202,236,866 171,071,729
-----------------------------------
Total......................... 1,026,069,968 855,237,837
------------------------------------------------------------------------
APPENDIX I.--TECHNOLOGY REQUIREMENTS FOR EITC CAN BE CATEGORIZED BY PRE-
FILING, FILING, AND POST-FILING ACTIVITIES \1\
------------------------------------------------------------------------
System Component Description
------------------------------------------------------------------------
PRE-FILING TECHNOLOGY
COMPONENTS
CERTIFICATION DATABASE....... Database containing certification status
(entered during Filing); Database may
contained imaged documents.
AUTOMATED INFORMATION SYSTEM. System for taxpayers to check
certification status through multiple
channels, including Internet, Phone (ACD/
IVR), E-File terminal, etc.
FILING STATUS SYSTEM......... System to build taxpayer profiles from
historical data to identify Filing
Status errors in post-filing in batch.
CHOICEPOINT SYSTEM........... System to import and store third-party
data (Choicepoint).
EITC UNDER REPORTER SYSTEM... System to analyze and access historical
AUR information and identify taxpayer
fitting certain criteria (i.e. repeater
offenders).
EITC CONTACT CENTER/ACCTS Complete call center solution that allows
MANAGEMENT. CSRs to access all EITC information;
DSTs; Ability to transfer calls to
external contractor; Includes
application to access imaged documents.
FILING TECHNOLOGY COMPONENTS
EITC E-FILING SYSTEM......... System that enables taxpayers to
electronically submit certification
documentation.
CERTIFICATION SYSTEM......... System to capture certification
information during processing; Includes
OTA-like Decision Support Tools to aid
in decisions; Provides certification
status to end-users; allows for
scanning, sending, and viewing of
documents (16 M) to central location.
FILING STATUS SYSTEM......... System to capture new Filing Status
information at time of processing.
MATCHING SYSTEM.............. System to match taxpayer reported
information against information stored
in databases to determine if filing
requirements have been met.
TECHNOLOGY MODIFICATIONS..... Master File and other systems
modifications to separate and freeze
only EITC portion of return (instead of
freezing the entire return).
POST-FILING TECHNOLOGY
COMPONENTS
RISK-BASED COMPLIANCE SYSTEM. System to analyze and identify trends in
non-compliance; This system will aid in
compliance strategies and case selection
(can leverage F&PC RBSS).
COMPLIANCE DATA SYSTEM....... System that allows Tax Examiners to
access multiple databases containing
EITC information.
FILING STATUS COMPLIANCE System to access and analyze filing
SYSTEM. status information (internal and third-
party) and identify errors in batch at
the time of filing; Includes automated
case building and issue-based notice
generation; Provides all relevant Filing
Status information to Tax Examiner;
Includes OTA-like Decision Support
Tools.
AUR MODIFICATIONS............ Systems changes to AUR that would allow
EITC cases to be identified, analyzed,
and worked separately from other AUR
cases; Includes changes to AUR to
include the expected change in EITC in
the AUR dollar discrepancy.
SUPPORT SYSTEMS
MIS.......................... System that provides all management
information requirements, including pre-
filing, filing, and post-filing
activities; Includes OTA-like Decision
Support Tools.
WORKFORCE/INVENTORY System to predict and manage workload and
MANAGEMENT SYSTEM. inventory in pre-filing, filing, and
post-filing activities; Includes OTA-
like Decision Support Tools.
------------------------------------------------------------------------
\1\ System includes applications, database, infrastructure, maintenance,
etc.; DST--Decision Support Tools.
SUBCOMMITTEE RECESS
Senator Shelby. Thank you. Thanks for your appearance.
The subcommittee is in recess.
[Whereupon, at 2:50 p.m., Wednesday, April 9, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
----------
THURSDAY, MAY 8, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:14 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Richard C. Shelby (chairman)
presiding.
Present: Senators Shelby, Campbell, Brownback, Stevens, and
Murray.
DEPARTMENT OF TRANSPORTATION
STATEMENT OF NORMAN Y. MINETA, SECRETARY
ACCOMPANIED BY DONNA McLEAN, ASSISTANT SECRETARY OF TRANSPORTATION FOR
BUDGET
OPENING STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. The committee will come to order. Welcome,
Mr. Secretary. We are pleased that you are doing better, and as
I told you, we will be walking briskly down the hall together.
We are pleased to see you here today. I know it has been a
difficult year for you and I hope that the remainder of 2003 is
better.
I look forward to our discussion this morning on the
Department of Transportation's 2004 budget request. I hope we
will also have an opportunity to uncover how the budget request
relates to your authorization proposals and your other goals
for the Department.
I first want to commend you, Mr. Secretary, for proposing a
budget that does not impose any new user fees. With our economy
struggling to recover, I believe that now would be the worst
time to increase the burden on transportation users. Our goal
should be to do more with less and to relieve unnecessary
impediments to efficiency in the transportation system.
In addition, I look forward to obtaining greater detail
about the proposal to establish a new $1 billion infrastructure
performance and maintenance program for highway projects that
can be constructed quickly, and how those funds would be
allocated to enhance transportation systems and relieve
congestion.
The budget request for the Federal Transit Administration
proposes the most significant changes from previous fiscal
years. I am skeptical that consolidation of programs and
distribution by formula of transit dollars will improve the
delivery of transit services or capital improvements. Formula
fights can be distracting and the Federal role in transit
should be more than simply revenue sharing.
Instead, I believe that we should structure transit funding
to improve rural connectivity, eliminate the bias toward rail
capital projects, focus Federal investment on key projects that
might not otherwise get built but have a significant impact,
and put in place oversight procedures for early identification
of the risk associated with project execution.
While funding for the highway program is not what I had
hoped for, and is less than what we provided in the omnibus, it
is better than what the RABA-like mechanism would have
provided, and considerably better than some of the rumors that
were circulating last December. Nevertheless, I believe that
the highway obligation limitation needs to be increased and I
look forward to working with you to further that goal.
Other than that, I view this budget basically as a status
quo budget. I know that the Department has focused almost
exclusively on TSA last year and on transitioning Coast Guard
and the TSA to the Department of Homeland Security. But I did
expect a bit more in this budget proposal on where you wanted
to take the remainder of the Department.
I am as concerned about what is missing from the budget
request as I am with what it includes. Highway fatalities are
headed in the wrong direction, increasing for the fourth
consecutive year. And just as troubling, alcohol-related
accidents and fatalities increased again for a third time in as
many years.
Yet, there is no new initiative to increase seatbelt use,
reduce drunken driving, or to do anything differently at NHTSA
other than consolidating several existing State grant programs
or shifting funds for grant programs from FHWA to NHTSA.
I think that we can do better. Two years ago, Senator
Murray and I provided funding for Click It or Ticket campaigns.
After struggling with NHTSA to get them to use the money, the
program had a positive impact on the national seatbelt usage
rate. This shows why we need to make greater use of targeted,
data-driven programs.
If they work, you will have my support to grow the
initiative. If they do not, we will try something else, even if
that means upsetting some of NHTSA's partners. The only thing
that is not acceptable I believe is not trying new things to
reduce the carnage on our highways.
With regard to passenger rail, I must say that I am
disappointed there once again. The Department has failed to
provide the leadership, I believe, that is necessary to
transform Amtrak. While the Congress waits for a legislative
proposal that embodies the principles of reform that you
articulated last June, your representative on the Amtrak board
of directors has supported a budget that is an all-out effort
to preserve the current failed system.
Amtrak's budget assumes a Federal subsidy that is twice as
much as what was included in the President's budget, but does
not contemplate even minor changes to the current structure.
Amtrak's hostility to reform was further demonstrated when
Amtrak's CEO abandoned his commitment to fully recover the cost
of State-supported lines as soon as private rail companies
offered to provide the service for the States at a much lower
cost.
In a similar vein, I have impressed upon both your
predecessors and the FAA administrator that something needs to
be done to contain the cost growth of the FAA. Over the past 9
years, the FAA operations budget has grown 65 percent,
including a proposed 8.1 percent growth in the budget request
for 2004. By comparison, aircraft operations, the primary
driver for FAA operations activities, have declined 10 percent
since 2000. In a budget constrained environment it is
unsustainable to have unchecked costs at the FAA.
This is a perennial item on the Inspector General's top ten
management challenge list, yet nothing ever seems to get done.
Like Amtrak, ignoring the issue of cost growth of the FAA's
operation budget will not make it go away and is a disservice,
I believe, to the American taxpayer.
Finally, Mr. Secretary, I want to raise what I believe is
an emerging challenge for the Department and the FAA: the
economic trade and regulatory implications of a consolidated
European Union Member States open skies or open aviation area
concept.
Whether an open aviation area multilateral agreement is a
good idea or not, I believe that the die is cast and that the
European Union will be working in a much more coordinated
manner with regard to International Civil Aviation Organization
regulatory and safety issues. That presents enormous challenges
and potential risks for the United States given the opportunity
for mischief that can intentionally or unintentionally creep
into standards consideration and creation.
This is an important and a very complicated area and I
encourage you to put some of your best people on it and to
provide a clear and comprehensive statement of where you
believe the United States should head in this regard in order
to maintain our preeminence in aviation.
Mr. Secretary, we have an obligation to do better than just
delivering the status quo and I look forward to working with
you toward that end. It is good to see you again.
Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Thank you, Mr. Chairman. First let me join
with you in saying how pleased I am to see Secretary Mineta
back before this subcommittee. We all know that Secretary
Mineta has worked far harder than he should have during his
recuperation from surgery. I suspect that his leadership of the
Department during this period was far more involved than his
doctors would have liked. I want to publicly thank you for all
the extra effort during these last few months.
I know they have been difficult ones but our Nation and our
entire transportation enterprise is better off because of your
selfless commitment, Mr. Secretary, and we thank you.
Just a few minutes ago, I had the opportunity to introduce
Ms. Annette Sandberg to the Senate Commerce, Science, and
Transportation Committee. She is Secretary Mineta's Acting
Administrator at the Federal Motor Carrier Safety
Administration. I think the President made an excellent choice
in asking that she be appointed as the permanent Administrator
of that agency. Ms. Sandberg was the first woman to serve as
the head of a State police force, having served as chief of the
Washington State force for 6 years. I was really honored to
introduce her to the Commerce Committee today and I have great
faith in her ability to advance the cause of truck safety at
that agency.
With the passage of the Homeland Security Act, the
reorganization of the Department, and the reorganization this
committee, both Secretary Mineta and this subcommittee have an
opportunity to refocus and redouble our efforts on the core
missions of the Department of Transportation. For the last 2
years we have been focused on the urgent security needs in all
of the transportation modes. With that responsibility now
vested in another department and another Appropriations
Subcommittee, we can focus on alleviating congestion on our
runways and our highways, and minimizing the number of
transportation-related fatalities.
This morning I would like to focus on four areas of the
President's budget proposal: highway safety, aviation, highway
construction, and Amtrak. Mr. Chairman, as you mentioned in
your statement, we have experienced the fourth consecutive year
of increased fatalities on our highways and that unacceptable
record must be reversed. As I look at the President's budget
request for 2004 for the Department of Transportation, I see a
mixed bag. There are increased resources to address highway
safety, and this subcommittee will need to pursue whether the
requested levels are sufficient to really change behavior,
especially involving drinking and driving.
In the area of aviation, increased resources are requested
for the FAA's operations budget. However, given the financial
problems facing our airlines, the FAA has some major new
challenges. The FAA is charged with inspecting and certifying
the safety procedures for all of our airlines. At the same
time, the airlines are increasingly contracting out maintenance
to entities that have minimum Federal oversight. Indeed, the
FAA has its own standard requiring increased scrutiny of the
safety practices of airlines that are operating in bankruptcy?
It is not yet clear that the FAA even has enough inspectors on
its payroll to fulfill its own standard. It is also not clear
that the President's 2004 budget provides the kind of resources
that will enable the FAA to meet its standard if airlines are
still operating in bankruptcy in 2004.
In the area of highways, the President is calling for a cut
of $2.3 billion or 7.3 percent. This request is far preferable
to the $8.6 billion cut that the Administration requested last
year, but it is still moving, I believe, very much in the wrong
direction. As a Senator whose home State includes Seattle, a
city with the third worst traffic congestion in the Nation, I
can tell you that a further retreat in the Federal investment
in our Nation's highway infrastructure is not the right way to
go.
Finally, let me turn to Amtrak. The Administration has
requested $900 million. That is a reduction of 22 percent below
the de facto 2003 appropriations. Last year, the President
requested only $521 million. Further, this Administration never
articulated precisely how the railroad could avoid bankruptcy
at that level of funding. So this year's request, at least in
dollar terms, is an improvement.
With the $900 million request, the Administration may be on
its way to earning a seat at the table when it comes to a
meaningful discussion with Congress as to Amtrak's future. But
for the Administration to be a meaningful partner with us in
that discussion, the Administration needs to submit a
comprehensive reauthorization proposal for Amtrak. That
proposal was due to Congress over a year ago. We still have not
seen it yet, though the Deputy Secretary recently testified to
the authorizing committees about some of the concepts that we
can expect to see in the document. But we will not be able to
decide if $900 million is enough until we have seen the
Administration's actual proposal.
One thing I do know about this legislation is it is not
Secretary Mineta's fault we have not seen it yet. I can only
hope that in his last 30 days on the job that OMB Director
Daniels will take it upon himself to see to it that this piece
of business is taken care of before he leaves the Government.
So in conclusion, I want to thank Secretary Mineta for
being with us here this morning. I want to thank him as well
for the invitation to introduce his soon-to-be-confirmed
Federal Motor Carrier Safety Administrator. I look forward to
having a dialogue with him this morning about our shared goals
of alleviating congestion and saving lives.
Thank you, Mr. Chairman.
Senator Shelby. Senator Campbell.
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell. Thank you, Mr. Chairman. Welcome to my
friend and former colleague from the House side days, Secretary
Mineta. Our State of Colorado is the third fastest growing
State, Mr. Chairman, behind Nevada and Arizona. Certainly we
face the same problems all fast-growing States do. We have
transportation problems that are huge. We have one great big
construction job on I-25 between Denver and Colorado Springs
that we call T-Rex for an appropriate reason; because the thing
is a monster if you try to drive through there with the ground
tore up and the old bridges coming down, new ones going up, and
so on.
I have to associate myself with the comments of Senator
Murray and say that the President's budget I think is
inadequate. I worry that a lot of these contracts that have
been let are going to just leave the States hanging with their
projects half done and without enough money to finish them.
But I do want to thank you for your past support, Mr.
Secretary, for that particular project in Colorado because it
is a very unique project. It uses what is called a design-built
process which combines light rail, highway, bike, pedestrian,
and other transit options all into one. I think that when it is
finally done it is going to really become a model for the
country. So I want to thank you for that, and also for the help
you have given us with the sixth runway at DIA that is under
construction, as you know, and will be done shortly.
One concern I do have that really carries over from last
year, Mr. Chairman, is the hours of service that the Federal
Motor Carriers Safety Administration has implemented. I went to
the hearings before we delayed that for a year last year. I had
my staff go to two of them; I just went to one. I was convinced
then that the Administration had already made a decision and
they were just doing perfunctory things of listening to people
complain. But they are implementing that, and requiring the
truckers to stay off the road two more hours, which sounds good
on the surface.
But I have a CDL, as you probably know, Mr. Chairman. Still
have a couple of Class A trucks and go to those a lot, and I
think that there are some real downsides to it. The truckers
themselves, as you know in any kind of cold climate, they do
not shut those things off. That means they sit in truck stops
or on off-ramps and on-ramps, which are becoming more crowded
all the time, or in rest stops, highway rest stops that are run
by the States usually. They have to keep them on to stay warm.
I do not know how we say that we are going to save fuel by not
putting it to productive use and just keeping them running
while they are sitting there.
Secondly to that, most of the truckers that I know, they
get bored silly, so they just spend most of their time and most
of their money running the video games and doing the things
that now you can do at these big RV truck stop combinations.
We talk about safety. It is my understanding that if you do
implement these hours and you have the same amount of shipping
of merchandise, that means you are going to have more trucks on
the road to offset the ones that are just sitting idle for
those extra hours. For the life of me, I cannot understand how
that is an increased safety feature when you say there are
going to be more 18-wheelers on the roads instead of less.
I am going to ask the Secretary, if I can stay long enough,
to give me his opinion about the present state of that when we
get into questions and answers. But it is certainly one of my
big concerns.
Thank you, Mr. Chairman.
PREPARED STATEMENT OF SENATOR SAM BROWNBACK
Senator Shelby. Senator Brownback has submitted a written
statement he would like to have included for the record.
[The statement follows:]
Prepared Statement of Senator Sam Brownback
Mr. Chairman, I would like to thank you for holding this hearing
today and inviting The Honorable Secretary Mineta to testify before us.
There are two issues of particular importance to the State of Kansas
that I hope the Secretary will address today. First, is that of the
aviation industry and the need to bolster aviation and aeronautics
research and development. In particular, I would like to highlight a
bill I recently introduced with Senator Hollings, S.788, the Second
Century of Flight Act. Second, I would like to address the issues of
short line railroads and the needs there for track rehabilitation and
preservation.
Just last week in the Committee on Commerce, Science, and
Transportation we marked-up the Federal Aviation Administration (FAA)
Reauthorization bill. S.788, The Second Century of Flight Act addresses
many of the concerns currently facing the aviation sector. And I was
extremely pleased that my Colleagues on the Commerce Committee agreed
to include three out of the four titles of that bill in the FAA
Reauthorization.
This bill would create a national office to coordinate aviation and
aerospace research activities within the U.S. Government and
encouraging public-private cooperation. Additionally, this bill creates
a national office to focus on a next generation air traffic management
system and establishes a new educational program to train the next
generation of aeronautics engineers and mechanics.
I am sure it is a goal of all of ours to ensure that the United
States continues to lead the world in aeronautics and aviation safety,
technology, and efficiency.
Additionally, an issue that should be of importance to all of us in
the room is the future of ``short line'' local freight railroads. These
short lines account for roughly half the rail miles in Kansas. These
lines gather tens of thousands of carloads of grain and start them on
their way across the country and for export abroad. However, government
disincentives forced the prior owners of these light density lines to
neglect investment in the infrastructure, and now the weight of loaded
railroad cars are growing ever heavier. This has forced many of these
light density lines to abandon operations.
Last year, the Senate addressed these issues through Senate Bill
1220. That bill would have established a capital grant program for
rehabilitation and improvement of tracks and related structures on
small railroads to being the infrastructure up to a level permitting
safe and efficient operation. Unfortunately, that bill never saw action
on the Senate floor during the 107th Session of Congress. The Members
in this room should make a commitment to this issue, realizing the
important and impact short line operations have on highway miles.
Again, Secretary Mineta, thank you for being here today. I look
forward to hearing your responses to some of the questions I have for
you.
Senator Shelby. Mr. Secretary, your written statement will
be made part of the record in its entirety. You may proceed as
you wish.
STATEMENT OF NORMAN Y. MINETA
Secretary Mineta. Mr. Chairman, thank you very much, to the
members of the subcommittee as well, for this opportunity to
appear before you today. Before I begin, let me offer my
congratulations to you, Mr. Chairman, for taking the helm of
this very important subcommittee.
Senator Shelby. We swap it back and forth. But let's do not
do it soon.
Secretary Mineta. Again, I appreciate this opportunity to
be before you, and all the members of the subcommittee, who
have extended to me a very warm welcome. I have enjoyed the
opportunity to work with all of you in terms of advancing the
cause of transportation in our great country. I want to thank
you, Senator Murray, for taking the time to introduce Annette
Sandberg at the Commerce hearing on her nomination. As the
acting administrator of the Federal Motor Carrier Safety
Administration she has already been subjected to a great deal
of work in the short time she has been there.
Mr. Chairman, I would also like to introduce our Assistant
Secretary of Transportation for Budget, Donna McLean, who, with
your permission will be sitting at my side to assist me with
any details on questions that come up.
I am pleased to share with you the Department of
Transportation's 2004 budget. President Bush is requesting
$54.3 billion for the Department, including more than $14
billion, or 27 percent, that is being targeted to support my
number one priority, safety. As you have indicated, highway
traffic deaths are starting to go up. For the last 15 months,
my senior management team has spent a great deal of time
focused on the security threats that face transportation. But
this year I have challenged my team to bring that same passion,
that same innovation and what I hope will be the same
outstanding success on a simple but important goal: improving
safety and saving lives while continuing to improve America's
transportation system.
REAUTHORIZATION OF SURFACE AND AVIATION PROGRAMS
As you all are very well aware, the current laws
authorizing vital surface and air transportation programs
expire in the next few months. Accordingly, our 2004 budget
includes the foundation for proposed legislation addressing our
Nation's future transportation needs. President Bush recently
presented to the Congress his aviation reauthorization
legislation, the Centennial of Flight Aviation Authorization
Act, or Flight-100. Consistent with this proposal, the
President's 2004 budget requests $14 billion for the FAA. We
are currently finalizing our proposed surface transportation
reauthorization legislation and anticipate its delivery to you
shortly.
Although a few details are still under discussion within
the Administration let me simply say this, the Administration's
forthcoming reauthorization proposal will serve as the largest
surface transportation investment in our Nation's history. I
firmly believe that the Administration's proposal, when enacted
by the Congress, will dramatically further our efforts to grow
the Nation's economy without imposing any new gasoline taxes.
Now as a former member of Congress who spent considerable
time on the other side of this microphone, I know it is
important to determine what the total amount of funding will
be. But as all of you know, what we spend is only part of the
challenge in legislation we will work together on. How we spend
it is just as critical. That is why our proposal will be more
than simply a spending plan. It is a true blueprint for
investment.
Our proposal will include a dedicated commitment to saving
lives by consolidating and expanding Federal safety programs,
increasing funding flexibility for State and local authorities,
encouraging innovative financing tools, accelerating
environmental reviews by building on President Bush's executive
order on environmental stewardship, and finally, simplifying
transit programs to foster a seamless transportation network.
Now the President's 2004 budget supports these principles
by requesting $30.2 billion for highway programs, $1.2 billion
for motor carrier and highway safety, and $7.2 billion for
transit.
AMTRAK
In addition to our proposals to support our highways and
airways, President Bush is requesting $900 million for Amtrak.
But this funding comes with a very strong message. Amtrak must
undergo significant reform. Last week our Deputy Secretary of
Transportation, Michael Jackson, and our Federal Railroad
Administrator, Alan Rutter, testified before your colleagues in
the Senate and in the House on the Administration's vision for
a strong national intercity passenger rail system. I believe
that America deserves a national rail system that is driven by
sound economics, fosters competition, and establishes a long-
term partnership between States and the Federal Government.
Mr. Chairman, this vision cannot be achieved without a
fundamental reform of Amtrak. Simply put, America can no longer
afford the status quo. I am personally committed to working
closely with all of you, the Congress, the States, industry,
and labor leaders to develop a financially healthy system that
provides a viable national passenger rail service to America.
PREPARED STATEMENT
Let me close by again thanking you for the opportunity to
testify today. I have worked with all of you over the years on
these issues and I look forward to tackling them again with
you. I pledge that we will work closely with this subcommittee,
Mr. Chairman, and with the entire Congress as we consider the
2004 budget. Now I look forward to responding to any questions
that you might have.
[The statement follows:]
Prepared Statement of Norman Y. Mineta
Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to appear before you today to discuss the Administration's
fiscal year 2004 budget request for the Department of Transportation.
President Bush is requesting $54.3 billion for the Department including
over $14 billion, or 27 percent, targeted to support our number one
priority--safety. But before I outline the specifics of our 2004
budget, let me briefly speak to our making safety a priority while we
improve our Nation's transportation system.
For the Department of Transportation, 2003 will be a year of
special focus on highway and aviation safety. For the last 15 months,
we at the Department of Transportation have spent a great deal of our
time making transportation secure and responding to the threats of
terrorism. This was absolutely necessary. We've made great progress.
In the aftermath of September 11th, the Department of
Transportation had a laser-like focus on security. Two months ago, we
successfully handed off to the new Department of Homeland Security the
United States Coast Guard and the Transportation Security
Administration--two of their largest and high profile agencies.
The Department of Transportation is proud to have provided strong
leadership and steady support to the United States Coast Guard for more
than 35 years. I am particularly proud of our work standing up the
Transportation Security Administration from its creation through its
first full year of operation. Indeed, this was a monumental task--one
in which we performed under the intense glare of the public spotlight.
It was a task that many of the so-called ``experts'' said was
undeliverable.
On November 19, 2001, the day that the TSA was created, there were
only 33 Federal Air Marshals nationwide. At that time, there was a
poorly qualified, poorly equipped screener service at the airports,
with substandard supervision. In less than one year and under wartime
conditions, we recruited, trained, and deployed thousands of Air
Marshals. We recruited over 300 highly qualified Federal Security
Directors to oversee more than 429 airports in the country.
Through an unprecedented partnership with the private sector, we
processed over a million applications, and hired, trained, and deployed
more than 50,000 passenger and baggage screeners who provide world-
class security and world-class customer service.
All of this was done while meeting 37 mandates--36 of which were
set by you the Congress in the Aviation and Transportation Security
Act. The 37th was my own. I told my colleagues to be sure and meet the
other 36. I am proud to say that the stellar employees of the
Department of Transportation performed spectacularly--designing and
delivering, on time and in working order, the Transportation Security
Administration. When you look at the airline security system on
September 12, 2001 and our system today, I am tremendously proud of the
Department of Transportation and I am grateful to the Congress and this
Committee for the cooperation we received.
We at the Department of Transportation look forward to continuing
to work closely with our colleagues in the U.S. Coast Guard, the TSA,
and throughout the Department of Homeland Security to ensure that
America's transportation system remains safe, secure and efficient.
Now for this year, and going forward, I have challenged my senior
management team to focus the same passion and the same innovation spent
on security over the last year on a simple but profoundly important
goal: improving safety and saving lives. Once again, I would like you
in Congress to be our partners and achieve the same historic record of
performance.
As I stated at the outset, more than one quarter of President
Bush's 2004 budget is dedicated to ensuring the highest levels of
safety across America's transportation infrastructure. The
Administration's reauthorization proposals for both surface and air
transportation programs will provide evidence of our continued
commitment to safety. As you all know, those vital programs will expire
in September. In anticipation of this, our 2004 budget request includes
the foundation for proposed new legislation to address our Nation's
transportation needs over the next four to six years.
We recently presented to the Congress President Bush's aviation
reauthorization legislation--The Centennial of Flight Aviation
Authorization Act, or Flight-100. We look forward to working with the
members of this Subcommittee and with the entire Congress on swift
passage of both this key aviation legislation, and the upcoming surface
transportation legislation.
Let me share with you several principles of our aviation and
surface transportation reauthorization proposals.
--Our proposals will include an emphasis on consolidating and
expanding Federal safety programs.
--For the surface transportation programs, we will include increased
funding flexibility for State and local authorities.
--We will continue to encourage innovative financing tools.
--We will propose efficient environmental stewardship processes that
facilitate transportation infrastructure projects without
compromising the environment.
--Finally, we will continue a strong emphasis on public
transportation by simplifying transit programs and fostering a
seamless transportation network.
The $14 billion requested by President Bush for the Federal
Aviation Administration in 2004 will further ensure the highest
possible levels of safety throughout the aviation system.
Flight-100 improves safety oversight of operators, repair stations
and others, while tightening enforcement of the FAA's stringent safety
and maintenance regulations. Because at the same time travel demand for
air service will inevitably return to, and exceed, pre-September 11th
levels in the future, we cannot afford to reduce our commitment to
investing in the Nation's air traffic control system and our airports.
Equally important, we cannot take our eye off the safety goal: to
reduce aviation fatality rates by 80 percent over the period 1996 to
2007.
To meet both safety and mobility needs, the budget proposes to
spend a greater portion of the accumulated cash balances from the
Airport and Airway Trust Fund. The President's budget request and our
reauthorization proposal provide $2.9 billion in fiscal year 2004 for
facilities and equipment. In 2007, that figure rises to $3.1 billion.
Our proposal also provides $7.5 billion for FAA operations and
maintenance in 2004 to improve efficiency--an 8 percent increase over
the 2003 enacted level--and supports implementation of the Operational
Evolution Plan, the acceleration of airspace redesign, and future air
traffic controller staffing needs.
Turning to our soon-to-be presented surface transportation
proposal, let me begin with a fundamental principle: the President and
his Administration are committed to maintaining guaranteed funding
levels that link highway spending to Highway Trust Fund receipts.
Our proposed program spends at a level that keeps the Highway Trust
Fund balance relatively constant. The proposed obligation limitation
for 2004 is $29.3 billion. When comparing the Administration's 6-year
surface transportation reauthorization proposal in total to the six
years of TEA-21, the President proposes an overall increase of 19
percent. The fiscal year 2004 budget accomplishes this increase without
proposing new user fees.
For the Federal Highway Administration, the fiscal year 2004 budget
request proposes that all revenue from gasohol taxes be deposited
directly in the Highway Trust Fund rather than the current approach
that deposits gasohol taxes into the General Fund. If enacted, this one
change will add more than $600 million of available funding to the
Highway Trust Fund for each year of the authorization cycle.
In addition to spending estimated Highway Trust Fund receipts, our
proposal also unveils a new $1 billion Infrastructure Performance and
Maintenance initiative to fund preservation and congestion alleviation
projects that can be implemented quickly. Totaling $6 billion over the
authorization period, this funding will target projects that address
traffic congestion and bottlenecks, and improve pavement conditions.
Every year, more than 42,000 people die on our Nation's roads and
highways. This is unacceptable--we can and must do a better job to save
lives.
Reducing highway fatalities is ``priority one.'' That is why the
President's budget request includes $665 million for the National
Highway Traffic Safety Administration to reduce fatalities, prevent
injuries, and encourage safe driving practices. Of NHTSA's 2004 funding
request, $447 million will support grants to States to enforce safety
belt and child safety seat use and reduce impaired driving.
The Federal Motor Carrier Safety Administration, too, is focusing
on ways to prevent fatalities and injuries resulting from accidents
involving commercial motor vehicles. The 2004 budget request includes
$447 million to address these critical safety issues. We will also
continue to emphasize a comprehensive safety inspection program at the
southern border so Americans can be assured that trucks entering the
United States from Mexico meet our Federal safety regulations.
The Administration's 2004 budget request includes $7.2 billion to
strengthen and maintain our public transportation systems and includes
$1.5 billion to fund 26 ``new starts'' projects that will carry over
190 million riders annually when completed.
In addition to our proposals to support our highways and airways,
President Bush is requesting $900 million for Amtrak. But this funding
comes with a strong message: Amtrak must undergo significant reform.
Last week, my Deputy Secretary Michael Jackson and my Federal
Railroad Administrator Allan Rutter testified before your colleagues in
the Senate and the House on the Bush Administration's vision for a
strong national intercity passenger rail system. I believe that America
deserves a national rail system that is driven by sound economics,
fosters competition, and establishes a long-term partnership between
states and the Federal Government.
Mr. Chairman, this vision cannot be achieved without the
fundamental reform of Amtrak. Simply put, America can no longer afford
the status quo, and I am personally committed to working closely with
the Congress, the states, and industry and labor leaders to develop a
truly healthy and viable national passenger rail system.
Finally, I want to share with you President Bush's request for our
maritime programs. I am pleased that this Committee has recently
received the jurisdiction of all transportation modes including
maritime. I believe maritime transportation issues, particularly our
ports, are critical to the success of a truly intermodal transportation
system. Waterways, canals and rivers were one of our Nation's first
transportation systems. From the great explorers Lewis and Clark, to
today's Ready Reserve Force supporting our troops in the Middle East,
maritime shipping has moved generations of people and vital supplies.
The recent strike at our West Coast ports clearly indicated the
importance of our ports to the national economy. This Congress can
recognize that one of the true definitions of intermodalism and one of
the great economic challenges of the next two decades will be our
ability to move freight quickly and efficiently. To do so means
recognizing that America is a maritime nation and that moving freight
intermodally starts at the water's edge with our ports.
The Maritime Administration (MARAD) continues to support essential
transportation and intermodal connections for domestic and
international trade. President Bush requests $219 million to continue
MARAD's efforts to expand and enhance capacity of our Nation's maritime
infrastructure. One of MARAD's continuing challenges is the disposal of
obsolete ships that potentially pose an environmental risk to our
nation's waterways. The 2004 budget request includes $11.4 million for
removal of the highest risk ships.
My prepared remarks focus on only a part of the whole picture. Yet
each organization within the Department of Transportation contributes
indispensably to accomplishing the goals I have outlined.
Let me finish my testimony by returning to the issue of safety. On
9/11 this Nation was stunned by the degree of destruction and loss we
felt as a Nation by those horrific events. Each of us look back on that
day and know exactly where we were when we heard the news. Yet each day
thousands--thousands--of individuals experience their own moment of
destruction and loss when the daily toll of death and injury occur on
our Nation's roads and highways.
Frankly, we have been too complacent about finding new and
innovative ways to collaborate and end this plague on America. I invite
this Committee to join in finding new ways and new energy for better
solutions. Last year we created a legacy of achievement. We can do it
again.
Thank you again for the opportunity to testify today. My management
team and I will work closely with you, and with the entire Congress, as
you consider the 2004 budget and I look forward to responding to any
questions you may have.
HIGHWAY REAUTHORIZATION
Senator Shelby. Mr. Secretary, I have a number of questions
and I think the other participants here do too.
We have heard for months that the Department's TEA-21
reauthorization proposal will be ready for release in 10 more
days. Mr. Secretary, is the proposal ready to be transmitted to
the Hill or will it be ready in 10 more days? I am interested,
Mr. Secretary, not only because of its relevance to this year's
budget request, but also the Banking Committee, which we have
authorizing jurisdiction of transit and I as chair, am anxious
to begin work on the reauthorization, to work with you on that.
Secretary Mineta. Mr. Chairman, the budget is at the
printers and we anticipated that well within the 10 days we
will have all of that material to you.
Senator Shelby. Thank you. Mr. Secretary, virtually every
highway safety expert that we have consulted has stated that
increasing seatbelt usage is the most important way to reduce
highway fatalities. That is why 2 years ago Senator Murray, who
chaired the committee then, and I worked together to dedicate
funds for a national seatbelt paid media mobilization and
enforcement campaigns, what are commonly referred to as click-
it-or-ticket campaigns. The positive effects of these
mobilizations to increase seatbelt usage rates are undeniable.
According to NHTSA's evaluation, seatbelt usage increased by
8.6 percent.
In the omnibus we again set aside funds and directed NHTSA
to continue to fund click-it-or-ticket, and also expand this
approach to target alcohol-related driving, which we are all
concerned about. Mr. Secretary, with the demonstrated success
of the program, why isn't funding specifically identified in
your budget proposal to continue these campaigns in the year
2004? In other words, this is a program that Senator Murray and
I and others have seen the benefit of.
Secretary Mineta. Mr. Chairman, you are absolutely correct.
In fact on Monday I am going to be participating in a click-it-
or-ticket kickoff campaign. In our budget, I believe we have
something like $204 million for occupant safety programs. What
we want to do is to be able to increase seatbelt use. We have
18 States that have primary laws on seatbelt use, so one of our
efforts is to try to get more States to go from secondary to
primary laws relating to seatbelt use. Florida last week was
considering it, but unfortunately at the last minute they did
not take the bill to the floor. Massachusetts, I believe did
complete their passage of primary seatbelt law usage this last
week. We have many of the State legislatures that are in
session where we are working actively with them in order to get
primary seatbelt use laws on the book.
Senator Shelby. I know you have a long-term interest, you
did in your legislative career in safety. You put seatbelt laws
in use, bringing it up, pushed alcohol driving down. We are
making progress, are we not, those two together?
Secretary Mineta. Also on DUI (driving under the
influence), we are bringing an increased amount in the 2004
request where we will have $148 million to address impaired
driving fatalities. This is to increase the number of highly
visible sobriety checkpoints and other programs where we are
working with the State highway patrols. In fact when Annette
Sandberg was at the National Highway Traffic Safety
Administration (NHTSA) she undertook a very active program
because of her relationship with the International Association
of Chiefs of Police and her working knowledge of being able to
work with State agencies. So we are continuing that program
under the 2004 budget request that Annette started at NHTSA. We
are actively pursuing both programs as they relate to seatbelt
usage and the whole issue of occupant protection, including a
heavy emphasis on impaired driving.
AVIATION
Senator Shelby. A recent commission on the future of U.S.
aerospace industry has raised serious questions about the
competitiveness of U.S. firms in the global marketplace. It
blamed this situation on, among other things, restrictive
Government regulations, protectionist policies, and a failure
to invest in technology innovation. I guess the question comes
about, is America, Mr. Secretary, at risk of losing its
position of preeminence in aviation?
Secretary Mineta. This is a subject that I know that we are
pursuing within the Department of Transportation and within the
Administration. That is, to what extent should the Government
be working with industry in order to promote their specific
goals in terms of trade practices? Just yesterday there was an
article in the Wall Street Journal about Airbus moving away
from Pratt & Whitney and looking at just European engines. That
is the kind of thing that I think we ought to be looking at in
terms of our own department.
Senator Shelby. How can the Transportation Department
headed by you, how can you help?
Secretary Mineta. I think we can help in terms of making
sure that there are not any competitive impairments to our
industries to be able to work closely with other manufacturers.
In this instance, if there is a policy on the part of Airbus
just to deal with, let us say Rolls Royce, or with their own
other engine manufacturers in Europe, then I believe that kind
of trade practice is something we ought to be earmarking as a
subject of our interest.
INFRASTRUCTURE PERFORMANCE AND MAINTENANCE INITIATIVE
Senator Shelby. Mr. Secretary, infrastructure performance
and maintenance initiative. Do you envision this program as a
new apportionment program for the States or as a new
discretionary program administered by FHWA?
Secretary Mineta. The monies will go into the formula
program. Since the $1 billion is to be used for projects that
can be started very quickly, and if States do not use their
apportioned amounts, then we will draw that back and then
reshuffle that money back out to other States that are using
the money very quickly. But it will be distributed under the
formula that goes out to the States. To the extent that the
States do not use the money, then we will pull it back and, as
I say, redistribute that money back out to other States that
are utilizing IPAM for quick projects.
Senator Shelby. If this is a discretionary program, what
criteria would you propose to evaluate project eligibility?
Give us some examples.
Secretary Mineta. Those projects will be judged very
similar to how we judge programs under the Surface
Transportation Program.
FEDERAL AVIATION ADMINISTRATION REAUTHORIZATION
Senator Shelby. The FAA reauthorization. What actions will
FAA and the Department take to ensure the agency operates
within the amount that you are suggesting in the next 4 years?
Secretary Mineta. As you know, the operations account is
something that is a very tight budget issue and Administrator
Blakey is working on that matter as we speak. We are trying to
make sure that we can do this without any staff layoffs, and to
make sure that the safety of the flying public remains
paramount. The operations budget is very key to that. Because
of the pressures on the operations budget we are looking at all
alternatives to make sure that we can deliver safety to the
American flying public.
AMTRAK
Senator Shelby. Briefly, Amtrak appropriation. The 2003
appropriations bill placed a number of new requirements on
Amtrak's ability to obtain their Federal subsidy. I am
interested in your thoughts on how those requirements are
working, the interplay between FRA and Amtrak, and what, if
any, changes that you would propose to improve your oversight
of the railroad for the 2004 bill.
Secretary Mineta. Mr. Chairman, the requirements that were
placed in the omnibus bill in terms of requiring us to get a
business plan from Amtrak, and to get definitive cost
implementation schedules, all of that has now come to the
Department of Transportation from Amtrak. We have found that
this has been very helpful in terms of our formulating our 2004
budget as well as imposing on Amtrak these kinds of
requirements so that we will have the detailed information we
need in order to make decisions and choices to fulfill Amtrak's
needs. The requirements that were laid out were adhered to by
both Amtrak and DOT, and we have found those to be very, very
helpful.
Senator Shelby. Thank you. I will pick it up in another
round.
Senator Murray.
Senator Murray. Thank you, Mr. Chairman.
Mr. Secretary, your FAA administrator is about to enter
into new labor negotiations with most of her unions, and one
thing that could certainly sour those negotiations is the
current talk we have heard about the potential for furloughs of
FAA employees in the current fiscal year. Those rumors of
furloughs persist even if you were given more than 99 percent
of what you requested for FAA Operations this year. Although
you just said that you did not want to go that way, if you do
not, what other belt-tightening measures are you going to
implement in order to keep everyone on board?
Secretary Mineta. Because of their needs, the FAA
Administrator is trying to make sure that she takes a look at
all of the costs that are under operations. I believe that the
whole issue of trying to avoid furloughs is paramount as she
does her work on operations.
Senator Murray. Can you be more specific about what other
things you are going to do in order to comply with the amount
of money that you have if you do not do furloughs?
Secretary Mineta. For instance, the whole issue of what to
do on her telecommunications budget within the operations part
of FAA, is being looked at along with hiring freezes.
Senator Murray. Is there going to be a reduction in the
available overtime for air traffic controllers this summer?
Secretary Mineta. With a sufficient number of air traffic
controllers, we are hoping to reduce the number of overtime
hours. We are making sure that we have the right number of air
traffic controllers so that we can do it without the use of
overtime hours.
Senator Murray. There is also another issue of retiring air
traffic controllers and lack of backfilling for those
vacancies. In fact we have already had controllers at one of
our major air traffic control facilities complaining quite
publicly actually about vacant positions that are not being
filled and about the skies over Chicago not being safe to fly.
Are you confident we are going to have the necessary funds to
fill vacancies at that facility as well as sustain staffing at
your other air traffic control facilities throughout this year?
Secretary Mineta. On Chicago specifically, I think there is
a problem there, but it is an issue of the management there
utilizing the air traffic controllers in the most efficient way
possible. I believe, that with the reports that I saw earlier,
that there are many of the air traffic controllers who just are
not being utilized properly because of the management team
there. But nevertheless, I think Chicago is adequately staffed.
The overall picture is that in order to deal with this
retirement bubble that is coming up, we are also going to have
302 air traffic controllers that are included in this budget.
It takes us about 3 years to have a hired air traffic
controller to be at a full performance level.
Senator Murray. I would just say that I think there is a
real concern that we are not hiring those fast enough to meet
that 3-year requirement. So we will be watching that carefully.
Secretary Mineta. We believe that the whole level of
operations will not be coming back until about the year 2006,
and because of the reduced number of operations right now, we
feel what we are doing on hiring air traffic controllers
anticipates that operations increase when it occurs in 2006.
AMTRAK
Senator Murray. Let me turn to Amtrak. I earlier pointed
out that you are seeking a 22 percent cut in the total level of
funding for Amtrak. Testimony by your Deputy Secretary
indicates that the Administration views any amount over $900
million as excessive and unaffordable. You still have not
submitted the Amtrak reauthorization bill that was due last
year, but your Deputy Secretary has testified regarding, as I
said, some of the concepts that are going to be in your
legislation; concepts including dramatically increased cost-
sharing by the States for receiving Amtrak service, and a
requirement that Amtrak compete against other potential bidders
to operate your intercity passenger trains.
A great deal of Deputy Secretary Jackson's testimony
focused on the 17 so-called long distance trains that serve the
vast majority of our country. Amtrak's annual Federal subsidy
is over $1 billion a year and the company has almost $5 billion
in total debt. If we eliminated those 17 long distance trains
tomorrow, it would save the company absolutely nothing this
year. It would take 5 years before the elimination of those
trains even saved $200 million. The annual subsidy for these
trains, while high on a per-passenger basis is a pittance
compared to the Federal subsidy that is granted to the trains
operating the Northeast corridor.
Mr. Secretary, when you finally submit your reauthorization
proposal for Amtrak, will we find that the Northeast corridor
trains and the non-Northeast corridor trains will be subject to
equal treatment?
Secretary Mineta. Absolutely. The reason that the Northeast
corridor gets treated differently in certain respects is
because the underlying tracks do belong to Amtrak there. Our
intent is to eventually have two entities; one an operating
entity, namely Amtrak, and the other dealing with the
infrastructure of rail.
Senator Murray. Will there be identical cost-sharing
requirements by the States?
Secretary Mineta. The State would be required to agree to a
50/50 match.
Senator Murray. The Northeast corridor and the non-
Northeast corridor, will their cost-sharing requirements be
identical?
Secretary Mineta. Let me ask. In the long-term it would be
a 50/50 match. It would be the same cost-sharing.
[The information follows:]
Recently, the Department of Transportation completed its
legislative drafting of a bill entitled the ``Amtrak System
Stabilization, Improvement, and Streamlining through Transition Act.''
The purpose of the bill is to undertake a restructuring of intercity
passenger rail transportation in the United States that will allow it
to compete successfully with other modes of transportation. We are now
seeking final administration approval through OMB's legislative
clearance process. The administration will work to expedite clearance
as quickly as possible and hopes to transmit the text of the
legislation to Congress shortly. Following the transmittal of the bill
to Congress, we can address the question of implementation of the cost-
sharing requirements of the Northeast corridor and the non-Northeast
corridor.
Senator Murray. In the long run. Will they be implemented
on the same schedule?
Secretary Mineta. I think what we would have to do on the
Northeast corridor is to bring the tracks up to a level that
would be satisfactory. Because of the lack of investment in
infrastructure, the roadbed for the Northeast corridor needs a
great deal of work. We feel that before we turn it over to the
Northeast corridor companies, or the States, that we would have
to bring those railbeds up to a certain standard.
Senator Murray. Mr. Secretary, Amtrak is currently carrying
$3.8 billion in long-term debt and another $1 billion in short-
term debt. It is estimated that roughly 65 percent of that debt
is attributable to improvements that have been made to that
Northeast corridor. Your Amtrak reauthorization proposal is
going to propose the development of a Federal-State compact to
operate that Northeast corridor with the States taking on
considerable additional requirements to operate and maintain
that corridor. Will you be expecting this new compact between
the Federal Government and the States in the Northeast corridor
to take over the 65 percent of Amtrak's outstanding debt which
is attributable to the improvements that have been made in the
Northeast corridor?
Secretary Mineta. Frankly, we have not determined that
issue yet on the assumption or transfer.
Senator Murray. I think it is a very important question,
Mr. Secretary, and we would like to hear from you as soon as
possible. If they are not going to take the debt, who is going
to pay Amtrak's debts when you go into that compact? So I hope
to hear from you.
[The information follows:]
Recently, the Department of Transportation has completed its
legislative drafting of a bill entitled the ``Amtrak System
Stabilization, Improvement, and Streamlining through Transition Act.''
The purpose of the bill is to undertake a restructuring of intercity
passenger rail transportation in the United States that will allow it
to compete successfully with other modes of transportation. We are now
seeking final administration approval through OMB's legislative
clearance process. The administration will work to expedite clearance
as quickly as possible and hopes to transmit the text of the
legislation to Congress shortly. Following the transmittal of the bill
to Congress, we can address the question of who is going to pay
Amtrak's debts on the Northeast corridor.
SOUND TRANSIT
Senator Murray. I just have a few seconds left. I do have
one other question I want to ask you about, Mr. Secretary,
because Seattle is now the third most congested city in the
Nation. Two years ago, you recommended that the proposed
Seattle light rail project take a timeout for the purpose of
getting its house in order, and getting the cost and scope of
the project under control. I joined with you in that decision
and with the help of your FTA Administrator and Inspector
General, a lot of progress has been made. I have worked very
carefully with Sound Transit in Seattle to ensure that they
have reformulated their light rail project so that you and your
staff are fully satisfied that their cost estimates and their
construction plan are achievable. This project certainly
reached a major milestone when your administration included $75
million in your budget for 2004 and announced your plan to
revise the existing Full Funding Grant Agreement.
Can you tell me this morning, based on what you know about
the improvements that have been made in the planning and
financing of this project, do you currently have any
reservations surrounding your request for $75 million in 2004?
Secretary Mineta. Not at all. We are very confident about
the revised plan and we appreciate your work in working with
the Sound Transit System. I personally have a great deal of
confidence in the Executive Director of the system there. I
think she has gone a long way in helping both the system as
well as the working relationships between FTA, your office, and
the Sound Transit System, and has been able to come up with a
great plan.
Senator Murray. I agree. Can you tell me when you expect a
revised Full Funding Grant Agreement to come to Capitol Hill on
that project?
Secretary Mineta. That is something I will have to submit
to you. I am not sure that we have a set schedule yet.
[The information follows:]
On January 19, 2001, the Department of Transportation approved the
Full Funding Grant Agreement (FFGA) for the Central Puget Sound
Regional Transit Authority. At the time the project was approved, major
changes in the project's tunnel alignment were being discussed. The
Department has withheld funding for the project until a number of
financial and timing issues are resolved and Congress had time to
adequately review the grant agreement. On July 7, 2003, the
Department's Office of Inspector General (IG) issued a report on its
audit of the project. The Federal Transit Administration (FTA) has
concurred with the IG's recommendation, stating that it will request
that the Sound Transit Board of Directors formally agree to actions
specified in the IG's recommendations. FTA will closely monitor Sound
Transit's continuing financial responsibility to operate, maintain and
reinvest in its existing transit system as well as the Initial Segment,
as is the practice under all FFGAs. Further, FTA will not execute the
FFGA prior to written notification from the Sound Transit Board of
Directors of their agreement to take the actions specified by the IG.
Senator Murray. All right. Thank you very much, Mr.
Secretary, and thank you, Mr. Chairman.
Senator Shelby. Senator Campbell.
HOURS OF SERVICE
Senator Campbell. Thank you, Mr. Chairman. I would like to
ask the Secretary one general question about hours of service
and something specific to Colorado before my time is up.
Mr. Secretary, very frankly, I have to tell you, I think
the people that wrote the revision of hours of service neither
know the significance of the trucking industry in America or
the precarious position they are in; either one. I understand
that over 1,000 companies, trucking companies went out of
business last year, went into bankruptcy. I know that
repossession of trucks are at an all-time high. Even with that,
there are a shortage of drivers even for the remaining trucks.
It is something like 95 percent of everything that moves in
America, every portable thing that you can think of travels on
a truck. So I think it is a very significant industry and I am
really concerned about this change of hours of service.
I would like you to, if you could, tell me, tell the
committee where the rulemaking has changed and where we are on
it.
Secretary Mineta. Senator Campbell, as you know, this rule
was released about 3 weeks ago, I believe. The effective date
of the Hours of Service rule will be January 4, 2004. I think,
from what I can gather, since we had issued the original notice
of proposed rulemaking we got something like 53,000 comments
during the comment period. The Federal Motor Carrier Safety
Administration went through all of those comments.
Senator Campbell. How many of the 53,000 would you say were
supportive or opposed to changing?
Secretary Mineta. As I recall, we had a substantial
percentage of the 53,000 that were supportive of the rule. This
is the first time since I believe 1939, that we have revised
the hours of service rules in a significant way. This rule is
supported by the American Trucking Association. I think the
major opposition comes from the independent drivers.
Senator Campbell. The ATA represents the large fleets. I
think it is called OOIDA or something, represents the little
guys, the ones I am really concerned about losing their homes.
It is also my understanding though that these hours of
service are almost impossible to monitor with the Mexican
trucks that will be coming north now under the NAFTA agreement.
They have a log book, but they do not have to keep up with them
in Mexico.
Secretary Mineta. They will be subjected to the same
requirements once they are able to come in to the United
States. We intend to enforce the law on hours of service
against the Mexican drivers as we would U.S. drivers, or
Canadian drivers.
Senator Campbell. Thank you. I guess the proof will be in
the pudding to see if it works or not. I am absolutely
convinced though it is not going to work to the benefit of
either drivers or small truck owners, or to the country at
large that has to do a lot of shipping.
COLORADO BLOOD-ALCOHOL STANDARDS
Let me ask just a couple related to Colorado. Colorado is
one of the few States that has a two-tier system relating to
blood-alcohol content. We have a driving while ability impaired
is a lesser charge where the blood alcohol content is less than
.05 percent and .09 percent. During the authorization of TEA-21
Federal funds were tied to each State requiring them to lower
the blood alcohol content to .1 percent if the States did not
change their laws. If they did not then the States were going
to be penalized and funds withheld. That is going to cost
Colorado about $50 million a year.
If the Colorado law already requires a stricter requirement
under blood alcohol content, why should the State be penalized,
if it is more strict than the Federal requirement now?
Secretary Mineta. Senator, I will have to get together with
you on that because I am not familiar with the requirement.
[The information follows:]
To qualify for an incentive grant under Section 163, and to avoid a
sanction under Public Law 106-346-Appendix, sec. 351, 114 Stat. 1356A-
34, 35 (Section 351), a State must enact and enforce a law that
provides that any person with a blood alcohol concentration of 0.08
percent or greater while operating a motor vehicle in the State shall
be deemed to have committed the per se offense of driving while
intoxicated or an equivalent per se offense.
The State of Colorado does not currently have a driving while under
the influence (DUI) per se law that is stricter than the requirements
of 23 U.S.C. Section 163 or that meets the requirements of Section 163.
The State's standard DUI per se offense applies at .10 BAC (Colo. Rev.
Stat. Sec. 42-4-1301(6)(a)). The .05 to .09 provisions relate to
permissible inferences that are not a part of Colorado's DUI per se
law. Rather, the inferences allow the evidence of a person's blood
alcohol concentration to be deemed relevant and possibly admitted in a
prosecution for DUI or driving while ability impaired (DWAI). These
inferences are merely permissible, not mandatory. Accordingly, these
provisions cannot be utilized by the State of Colorado to demonstrate
compliance with the requirements of Section 163.
ASR-11
Senator Campbell. All right, I appreciate that. One other
one you may have to look up. We have an airport that has been
waiting for years and years to get a radar system called an
ASR-11. I know Senator Murray also has been waiting, and
Senator Stevens too. I understand that that radar system, there
are some concerns about its viability and that has really
halted the installation. Could you give me a status report on
the certification of that ASR-11? You probably do not have that
right there in your notes either, but if you could get back to
me. The county that I have been working on for years trying to
get one is called Eagle County, right in the middle of those
mountains. Very predictably dangerous place to land when we
have high peaks all around and bad snowstorms and so on. So I
would appreciate it if you could----
Secretary Mineta. I will get back to you on that, sir.
[The information follows:]
ASR-11 is a joint FAA and Department of Defense procurement program
intended to replace aging Airport Surveillance Radar Models 7 and 8,
which are nearing the end of their service life and becoming more
difficult to maintain. The ASR-11 system is an integrated system that
includes a primary radar system and associated beacon system. The ASR-
11 will provide digital radar input to new automation systems such as
Standard Terminal Automation Replacement System (STARS).
Results of operational tests have proven the system suitable for
operational use. The FAA proposes to formally certify the ASR-11 system
for national use by August 2003.
The FAA has met with Eagle County Airport and Eagle County
Commissioner representatives to discuss possible surveillance solutions
to address Eagle County's air traffic surveillance needs. Work is
continuing with local and regional personnel to define and evaluate
potential improvements. A recommendation and business case is expected
by November 2003.
Senator Campbell. All right, thank you. I have no further
questions, Mr. Chairman.
Senator Shelby. Senator Brownback.
STATEMENT OF SENATOR SAM BROWNBACK
Senator Brownback. Thank you, Mr. Chairman. I appreciate
being able to join your subcommittee for the first time. It is
a pleasure to be here. Mr. Secretary, glad to have you here as
well.
Secretary Mineta. Thank you, sir.
AVIATION INDUSTRY
Senator Brownback. I want to focus my comments on two
areas. One is on the aviation industry itself. I understand the
chairman made some comments about this as well. Wichita, in my
State, the general aviation manufacturers in that State are
headquartered in Kansas. Boeing has a huge plant in the State.
This has been an industry that has been decimated in recent
times. We had 30 percent layoffs, employment layoffs. That is
bad enough. But it is an industry that is somewhat use to the
cyclical nature. At least the general aviation manufacturers,
not so much Boeing.
But when I met with the industry leaders in December
something really troubling came up. I had all the leaders of
the industry in a meeting and they were saying--they are used
to in general aviation, the gamma groups are is the used to
kind of an up and down nature of the industry.
But what they are seeing take place is that as they are
strapped for cash, they are needing research money to develop
the next wave of products, the next wings, the next engines,
the next fuselage of the products. They are having countries
come to them and saying, we will pay for the research and the
development of the wing, a Japanese company but it is backed by
the government. Saying, we will pay for the development of the
wing of this new product, but you have to manufacture the wing
then in Japan.
Or China is doing a similar sort of push where the
government is paying for the research and then using that as a
hook to leverage the jobs coming to that country, to where the
industry may be fundamentally restructuring now, as we speak,
because the companies are strapped for cash. They are strapped
to make the next wave of products. They need the research money
to get the next wave of products, and they are getting it from
foreign governments that are being backed by companies there
that are then saying, we have to manufacture the wing or the
engine or whatever the piece may be.
So we may end up being just an assembler of aviation
products rather than the developer and lose all the jobs
underneath the system. So at the end of the day, the product
still comes out of Wichita, but it did not really come out of
Wichita. It came out of China or Japan or India or Europe.
To me this is a very troubling trend. We have been a
leading aviation researcher, manufacturer since flight began,
since the Wright brothers. It seems to me that we are on the
edge of losing that. Five years ago, if the numbers I have are
correct, we put about $1 billion a year into aviation research
as a government. This is a combined set of sources. NASA had a
major piece of that. Now we are about $500 million a year, so
we have cut that in half at the same time the rest of the world
is investing.
Now you can say, okay, it is another manufacturing set of
jobs; maybe we are going to end up losing those too. But these
are the highest wage, highest skilled manufacturing jobs in the
world. People bid heavily for them. What I think we are doing
is we are in the process of losing them by virtue of not paying
attention.
If we were losing them just as direct company on company
competition, I can handle that. But not if it is a government-
subsidized research basis on it, and then the company coming in
privately. If that is the case, we either should back them down
in trade negotiations or we should subsidize.
So I am coming to you with this issue. I put forward a bill
with Senator Hollings and the Commerce Committee, Second
Century of Flight. Calls for a coordinator on the overall
aviation research. It calls for more investment in aviation
research. It calls for incentives to draw the next wave of
engineers into aviation research. It is Senate bill 788. It has
cleared through Commerce Committee as the authorizing. All but
one title of it has cleared through the Commerce Committee. I
would ask that you would look at that and I would hope would
aggressively get behind it or something like it, because we are
really losing this business.
And I would appreciate it if you would be willing to
consider bringing in these aviation business leaders in a
roundtable. I think they would be more than willing to come, or
gather at the conference, a conference call, and ask them the
same questions about the restructuring of the industry, because
this is happening right below the surface. The company stays in
Wichita but the product and the jobs are actually coming in
from other places. It should not be happening that way. I would
hope you could back more in the way of aviation research or
specifically this bill.
If you would care to comment, I would appreciate it.
AVIATION RELATED RESEARCH
Secretary Mineta. As I understand it, Titles I, II, and III
of your bill were incorporated into the aviation
reauthorization legislation that the Commerce Committee took up
last week.
Senator Brownback. That is right.
Secretary Mineta. We look forward to working with the
committee on the structure as you have outlined it in S. 788.
This issue goes back to something earlier that the Chairman
mentioned and Senator Murray has an interest in as well. That
is, to what extent can we do Federal research, without being
accused of subsidizing the aviation industry? This is something
that we deal with the European Union on all the time. When we
went through the Aviation Stabilization Act and we reimbursed
airlines for losses in that period subsequent to September
11th, the Europeans were complaining that we were subsidizing
our airlines in terms of their operations. All we were saying
was, we were reimbursing them for their operational losses as a
result of my grounding all the planes on the 11th of September,
and for that subsequent period before the airlines got back
into operation.
Whenever we get into research, we do research on wings and
to the extent that Boeing uses that research to build a plane,
or Gulfstream, or Beech, or anyone else, then we get accused of
subsidizing the firms. The earlier question that the Chairman
was asking is something that I want to get into because I think
that, as you have indicated, we have somewhat lost our
technology edge in terms of aviation.
I remember being on the Science Committee in the House and
I remember saying to Dan Goldin, what happened to the ``A'' in
NASA? It was National Aeronautic and Space Administration
(NASA), but the aviation budget was going down, down, and down.
I was fearful that it was going down so much that Langley,
Wright-Patterson, and Ames Research Center at Moffett Field
would also be cut back. I believe that the problem with NASA,
is that their research budget still goes down because all of it
is being sucked up by the space station. The FAA's research
program is done mostly by NASA.
Senator Brownback. If I could ask you, because the time is
so short, if your agency could really start a study of what is
taking place, because if other countries are doing this, then
we should start a trade action against them. Particularly
Boeing, we are down to now 50 percent or below of market share,
and that is all by a subsidized Airbus that has come in and
taken that market share. We should be taking trade actions
against Airbus. I would hope your agency would push on that. Or
if we are not going to do that, that we would equal the
European subsidy and then make them sue us in the trade courts.
Secretary Mineta. You are absolutely correct, Senator
Brownback. About 4 months ago, I had asked our Under Secretary
for Policy to start taking a look at this whole issue. Then
yesterday, there was a article in the Wall Street Journal about
Airbus pulling back from Pratt & Whitney so they could look
exclusively at European engines. That prompted me to tear that
article out and send it to Jeff Shane to, again, make sure that
we are pursuing this issue.
[The information follows:]
The Department of Transportation continues to closely monitor
issues concerning possible subsidies and potential unfair trade
actions. In all cases of possible unfair trade practices, the
administration seeks compliance with international trade obligations
and is prepared to employ appropriate bilateral and World Trade
Organization mechanisms to achieve that outcome.
Senator Brownback. I would urge it. I have got an issue I
will submit to you for the record of short line railroads and
the need for help on short lines, because on moving freight
that are key for a State like mine. But I will submit that.
Mr. Chairman, thank you.
Senator Shelby. Thank you, Senator.
NEW ENTRANT PROGRAM
Mr. Secretary, I have a few more questions. You have been
very patient. The FMCSA budget proposes a total of $33 million
for implementation of the new entrant program. Given that there
are approximately 50,000 new entrants every year now, how many
audits does the Department actually expect to conduct if this
program is fully funded?
Secretary Mineta. Mr. Chairman, I am not sure.
Senator Shelby. Do you want to get back with me on that?
Secretary Mineta. I will get back to you on that, sir.
[The information follows:]
FMCSA will conduct safety audits on all new entrants within the
first 18 months of carrier operations consistent with current law and
regulation. The agency anticipates that 31,800 audits will be conducted
in fiscal year 2004. This will be accomplished using both Federal and
State safety inspectors: State inspectors will conduct an estimated
19,800 audits and Federal personnel an estimated 12,000 audits. The
balance of audits will be completed within the first 6 months of the
following fiscal year, consequently meeting the 18-month legislative
requirement to conduct audits on the full estimated annual population
of 50,000 carriers. This program will continue on a cyclical basis as
approximately 40,000-50,000 new entrants are expected to apply for
interstate operating authority annually.
Senator Shelby. I just want to add this to it. If we cannot
expect to conduct an audit of every new entrant, what
consideration has been given to phasing in the program or
setting up some sort of criteria for prioritizing these new
entrants that will be audited? You can do that for the record.
Secretary Mineta. We will include that as well.
[The information follows:]
FMCSA will conduct safety audits on all new entrants. With the
funds requested in fiscal year 2004, FMCSA will ramp-up the New Entrant
program by hiring 67 contracted auditors and 32 oversight personnel;
make facilities improvements; and train Federal, contract, and State
staff.
Audits will be conducted on a first in/first out rolling basis. New
entrants will be audited no sooner than 90 days after they start
operating. This will provide FMCSA with a 90-day window to obtain
roadside inspection data from the new entrants, as well as allow
carriers time to stabilize their safety processes after starting their
new businesses. FMCSA will contact these carriers at the 90-day point
with the intent of completing the audit as close to that point as
possible.
By the end of the third quarter of fiscal year 2004, the program
should be operating at full capacity and FMCSA plans to cover any
backlog of audits not completed in fiscal year 2004 during the first 6
months of fiscal year 2005 in order to meet the 18-month legislative
requirement to conduct audits on the full population of carriers
subject to an audit.
MARITIME ADMINISTRATION TITLE XI PROGRAM
Senator Shelby. Title XI, guaranteed loan program; get into
that. What plans, if any, do you have to help assist the
shipping industry in securing financing? You are familiar with
the program, the MARAD program?
Secretary Mineta. Yes, sir. The only one we have right now
is the Title XI program.
Senator Shelby. It has taken a downturn. Since 2000, the
program has paid out almost $500 million in defaulted loans.
What steps are you taking to help get this program back on
track?
Secretary Mineta. This has been a real issue because I
think we have had defaults amounting to something like $489
million.
Senator Shelby. It is a lot of money, $500 million.
Secretary Mineta. Yes, sir. I believe we are requesting
$4.5 million in the 2004 budget in this program. We are looking
at the recommendations that will be forthcoming from an
Inspector General report on this whole issue of the Title XI
program.
FAA OPERATIONAL ERRORS
Senator Shelby. In 2001, FAA began replacing air traffic
control supervisors with controllers who assume supervisory
duties and were designated as controllers in charge (CIC).
According to an Inspector General's April 2003 report, the
number of operational errors that occurred while a CIC was
supervising an area in calendar year 2001 increased 46 percent
compared to calendar year 2000. Has FAA determined the reason
for the increase? If so, do you know what corrective actions
the FAA leadership have taken or has planned? If you do not
know offhand, you can get back to me.
Secretary Mineta. Let me get that for the record.
[The information follows:]
The Federal Aviation Administration investigates all incidents
involving operational errors. In the course of these investigations,
the agency looks for causal factors and makes appropriate adjustments
to correct identified problems, which may affect safety. Since the CIC
expansion in January 2001, FAA has not seen the program impact safety
and has not seen an increase in operational errors. In fact, the
records show an overall decrease in operational errors of 11 percent
from fiscal year 2001 to 2002. Below is a table that reflects the data
for fiscal year 2001-May, 2003.
------------------------------------------------------------------------
Operational Errors
------------------------------------------------------------------------
Fiscal year 2001............................... 1,193
Fiscal year 2002............................... 1,061
Fiscal year 2003 (through May)................. 714
------------------------------------------------------------------------
Senator Shelby. Absolutely. Forty-six percent is a big
number.
AIRPORT COMPETITION
Airport competition. Secretary Mineta, AIR-21 included a
provision that prevents certain large and medium hub airports
from receiving AIP funds or collecting new PFCs unless they
submit competition plans to the Department of Transportation.
It is my understanding that each year these airports must
submit competition plans on an annual basis and are required to
provide detailed information on an extensive list of items.
I will support any proposal that will increase competition
in the commercial airline industry. Are you aware if air
carriers have received access to gates and other facilities as
a result of the competition plan requirements?
Secretary Mineta. I know the competition plans are being
submitted, that those plans have opened up opportunities for
new entrant carriers----
Senator Shelby. It is so important; competition.
Secretary Mineta. Where you have a dominant carrier, they
will probably be at gates 1 through 43, and the new entrant
carrier will be at gate number 89. That is part of the whole
issue that we are trying to deal with in having the airports
submit these competition plans, so that we can make sure that
the playing field is level.
Senator Shelby. Absolutely.
Secretary Mineta. Especially today with traffic being down.
Senator Shelby. Is it having an effect yet? Because that is
the bottom line.
Secretary Mineta. I do not think so yet, because a number
of the gates are still retained by carriers and they will not
release them.
Senator Shelby. They will not release them although they do
not need them?
Secretary Mineta. Right. But, I suppose where the airlines
have what they call a majority in interest clause, the dominant
carrier can be pretty aggressive in determining when they
release those gates.
Senator Shelby. Absolutely. We found that out here from
oversight. But at the same time, it stifles competition.
Secretary Mineta. That is right. You are absolutely
correct.
Senator Shelby. What we are interested in, and you are too,
is competition in the marketplace.
Secretary Mineta. Right.
Senator Shelby. We all benefit, do we not? All the airlines
will ultimately benefit because they will have to change their
business model to compete, or disappear. That is the nature of
the business. It is tough.
I saw that the Department included a placeholder for
competition plans in its FAA reauthorization proposal. Are you
proposing to expand, Mr. Secretary, the current requirements?
If so, is it necessary?
Secretary Mineta. I am not sure what you are referring to
under placeholder.
Senator Shelby. Competition plans, we saw that the
Department included a placeholder for competition plans in its
FAA reauthorization proposal. The question is, are you planning
to, or proposing to expand the current requirements? The
placeholder, we wonder what is going to happen there?
Secretary Mineta. Let me find out. Mr. Chairman, it is my
understanding that the Administration, I assume through the
Domestic Policy Council, is looking at the whole issue of the
airline industry as it is today. So part of this whole effort
is to deal with the competition that exists. It is my
understanding that this was just a placeholder put in place for
the Administration to eventually come up with a program
relating to competition in the airline industry.
[The information follows:]
U.S. Department of Transportation,
Office of the Secretary of Transportation,
Washington, DC, May 20, 2003.
The Honorable John McCain,
Chairman, Committee on Commerce, Science, and Transportation, United
States Senate, Washington, DC, 20510.
Dear Mr. Chairman: The Department of Transportation requests your
Committee's consideration of the enclosed two legislative proposals for
inclusion in pending bills to reauthorize activities of the Federal
Aviation Administration (H.R. 2115 and S. 824).
The two proposals are intended to strengthen the ability of United
States air carriers to compete domestically and internationally. The
effects of September 11 on airline traffic and, consequently, on the
financial health of U.S. air carriers have been exacerbated by the war
in Iraq and by SARS. Given the growing external pressures to which
aviation is being subjected, the Department has continued to identify
ways to give U.S. airlines the tools necessary to respond to market
forces since Secretary Mineta transmitted our FLIGHT-100 Act proposal
to Congress in March.
The proposal to allow greater access to foreign capital markets
would expand the resources potentially available to U.S. carriers as
they restructure their operations in response to the challenges of
today's domestic and international aviation realities. Raising the
ceiling on the percentage of voting shares that can be owned by foreign
citizens (without changing the requirement that U.S. carriers be
controlled by U.S. citizens) would be consistent with foreign
investment restrictions that apply to airlines in European Union
countries and those of other U.S. bilateral partners. Achieving a
consistent approach in the investment area could facilitate the United
States' reaching new aviation agreements, thus expanding opportunities
for U.S. carriers.
The second proposal would expand the number of airports covered by
the requirement (added by AIR-21 in 2001 to title 49) requiring certain
large and medium hub airports to submit a plan for increasing
competition along with any PFC request or AIP grant application. The
expansion would be from approximately 38 to 50 airports, including
large gateway airports that are not now covered.
The Department has devoted a considerable amount of time to
reviewing competition plans and offering suggestions as to what actions
airport officials could take to enhance competitive airport access. As
a result of the plan filings and suggestions by the Department, some
positive pro-competitive steps have been taken at the 38 airports
required to file a plan. Such steps include making gates and related
facilities more available and access requirements more transparent,
pre-approving leasing and subleasing arrangements, monitoring gate use,
converting exclusive-use gates to common-use and recapturing unutilized
gates. Low-fare air carriers benefited from the competitive actions by
airport officials. In this regard, at 29 of the 38 airports, new or
expanded entry/service has occurred. Large air carriers have also
benefited through new lease arrangements and gate-change
accommodations.
To build on the success of the AIR-21 competition plan requirement,
we are proposing to expand the number of airports required to file a
plan to include all large hub airports. This expansion will capture
several facility-constrained airports. We are also proposing that
airports (1) actively monitor how frequently their gates are used, (2)
develop uniform gate-assignment protocols and notify all carriers when
gates become available, (3) adopt fair sublease arrangements, (4)
develop procedures to disapprove proposed subleases that would restrain
competition, (5) prevent the use of majority-in-interest clauses that
limit the airport's ability to develop projects necessary to enhance
carrier access, and (6) implement dispute resolution procedures. These
additional requirements will provide a framework by which all air
carriers are given full, fair and transparent competitive airport
access.
We appreciate the Committee's support to date for the Department's
proposal transmitted on March 25 and would ask for favorable
consideration of the enclosed proposals. The Office of Management and
Budget advises that it has no objection, from the standpoint of the
Administration's program, to the submission of these proposals to the
Committee for its consideration.
Sincerely yours,
Kirk K. Van Tine.
SEC. __. AIR CARRIER CITIZENSHIP.
Section 40102(a)(15)(C) of title 49, United States Code, is amended
by striking ``75'' and inserting ``51''.
SEC. __. COMPETITION PLANS.
(a) Section 47106(f) of title 49, United States Code, is amended--
(1) in paragraph (2) by--
(A) adding the following after ``gate-assignment
policy,'': ``requests for access or accommodation by
new entrant and incumbent carriers, responses thereto,
and reasons for any denials of such requests,''; and
(B) adding a new sentence at the end of the
paragraph as follows: ``A competition plan under this
subsection shall also include a justification as
reasonable and not unjustly discriminatory (i) for any
differential or variance in fees and/or terms of use
for gates and associated facilities (including
overnight parking) charged to existing and prospective
carriers, respectively; and (ii) for any failure to
provide access, such as by undertaking the activities
listed in subparagraph (4) below within 90 days of a
carrier's request.'';
(2) in paragraph (3), by striking subparagraphs (A) and (B)
and inserting the following:
``(A) that has more than .25 percent of the total
number of passenger boardings each year at all such
airports and at which 1 or 2 air carriers control more
than 50 percent of the passenger boardings; or
``(B) that has more than 1 percent of the total
number of passenger boardings each year.''; and
(3) by inserting at the end new paragraphs (4), (5) and (6)
as follows:
``(4) Gate availability.--In the case of a covered airport,
as defined in paragraph (3) of this section, the airport owner
or operator shall demonstrate that it will make gates and
related facilities (including overnight parking) available, and
otherwise provide access to new entrant and other requesting
carriers by, e.g., undertaking the following activities:
``(A) developing dispute or complaint resolution
procedures including timelines, to resolve complaints
by new entrants or other requesting carriers about
access;
``(B) specifying and publishing requirements for a
new entrant to acquire a gate and for an incumbent
carrier to expand;
``(C) providing an airport competitive access
liaison;
``(D) developing procedures to monitor actual
utilization of all gates and overnight parking
positions and to make this data available to the
Secretary and to the public;
``(E) maintaining a uniform policy of notifying all
carriers (both incumbents and potential new entrants),
of gate availability and having fair and transparent
gate assignment protocols, including timelines for
access;
``(F) adopting comparable policies and procedures
for subleasing of gates by tenant carriers;
``(G) adopting dispute resolution procedures,
including timelines, for disputes about sublease fees,
terms, and conditions, including ground handling;
``(H) adopting caps on sublease fees and ensuring
that non-tenant fees do not include charges for
unneeded services;
``(I) adopting policies to review and approve or
disapprove proposed subleases with explicit authority,
in current and future lease agreements, to disapprove
proposed subleases that would restrain competition by a
new entrant air carrier, a carrier offering competitive
service, or a carrier that is not dominant at the
airport;
``(J) making majority-in-interest clauses in air
carrier lease and use agreements inapplicable to an
airport development project necessary to enhance access
by an air carrier; and
``(K) posting the submitted competition plans
required under this subsection and the comments of the
Secretary in a publicly available location, including a
website if such internet website exists.
``(5) Plan approval.--The Secretary may disapprove a
competition plan that is not in accordance with this subsection
and guidance established by the Secretary. The Secretary shall
provide written notification of the disapproval to the sponsor,
which shall include specific findings regarding the basis for
the disapproval.
``(6) Witholding approval.--(A) The Secretary may withhold
approval of an application under this subchapter for amounts
apportioned under section 47114(c) and (e) of this subtitle
following disapproval of a plan under subparagraph (4) only
if--
``(i) the Secretary provides the sponsor or a
covered airport 30 days to address specific findings in
the notice of disapproval;
``(ii) the Secretary provides the sponsor of a
covered airport an opportunity for a hearing; and
``(iii) not later than 180 days after the later of
the date of the application or the date the Secretary
notifies the sponsor of the disapproval of the plan,
``(B) The 180-day period may be extended by--
``(i) agreement between the Secretary and the
sponsor; or
``(ii) the hearing officer if the officer decides
an extension is necessary because the sponsor did not
follow the schedule the officer established.
``(C) A person adversely affected by an order of the
Secretary withholding approval may obtain review of the order
by filing a petition in the United States Court of Appeals for
the District of Columbia Circuit or in the circuit in which the
project is located. The action must be brought not later than
60 days after the order is served on the petitioner.''
(b) Section 47107(a) is amended--
(1) in paragraph (1) at the end of the sentence, by adding
``, which includes providing competitive access.'';
(2) by adding at the end the following new paragraph:
``(21) in the case of a covered airport, as defined in
section 47106(f)(3), the airport owner or operator will
demonstrate that it will make gates and related facilities
(including overnight parking) available and otherwise provide
access to new entrants and other requesting carriers by
undertaking the following activities:
``(A) developing dispute or complaint resolution
procedures, including timelines, to resolve complaints
by new entrants or other requesting carriers about
access;
``(B) specifying and publishing requirements for a
new entrant to acquire a gate and for an incumbent
carrier to expand;
``(C) appointing an airport competitive access
liaison;
``(D) developing procedures to monitor actual
utilization of all gates and related overnight parking
positions and to make this data available to the
Secretary and to the public;
``(E) maintaining a uniform policy of notifying all
carriers (both incumbents and potential new entrants),
of gate availability, and having fair and transparent
gate assignment protocols, including timelines for
access;
``(F) adopting comparable policies and procedures
for subleasing of gates by tenant carriers;
``(G) adopting dispute resolution procedures,
including timelines, for disputes about sublease fees,
terms, and conditions, including ground handling;
``(H) adopting caps on sublease fees and ensuring
that non-tenant fees do not include charges for
unneeded services;
``(I) adopting policies to review and approve or
disapprove proposed subleases with explicit authority,
in current and future lease agreements, to disapprove
proposed subleases that would restrain competition by a
new entrant air carrier, a carrier offering competitive
service, or a carrier that is not dominant at the
airport;
``(J) making majority-in-interest clauses in air
carrier lease and use agreements inapplicable to an
airport development project necessary to enhance access
by an air carrier; and
``(K) posting the submitted competition plans
required under section 47106(f) and any comments of the
Secretary on the plan in a publicly available location,
including a website if such internet website exists.''.
Sec.__. Air Carrier Citizenship. This provision raises the maximum
percentage of an air carrier's voting stock that can be held by foreign
citizens (in the aggregate) from 25 percent to 49 percent. The change
is intended to create greater access for U.S. airline companies to the
global capital marketplace without affecting any requirements in
current law or Department of Transportation precedent that are intended
to ensure that U.S. airlines are controlled by U.S. citizens. The
amendment would bring U.S. foreign investment restrictions into line
with those of the European Union and other countries.
Sec. __. Competition Plans. This section would expand covered
airports to all large hub airports in addition to those medium hubs
that have two or less carriers with 50 percent or more of boardings. It
would clarify that compliance with the existing AIP grant assurance on
reasonable access includes providing competitive access. It also would
require a new AIP grant assurance to increase opportunities for
competition at covered airports and the use of gates and related
facilities at these airports by requiring covered airports to develop
dispute resolution procedures, publish requirements for gate access,
appoint a competitive access liaison, monitor usage of gates and
aircraft parking positions, notify carriers of the availability of
gates and of sublease opportunities on a uniform basis, adopt fair
protocols for gate assignment and for processing of subleases, adopt
caps on sublease fees, develop procedures to disapprove proposed
subleases that would restrain competition, prevent the use of majority-
in-interest clauses to airport development projects necessary to
enhance air carrier access, and to post the competition plan on the
airport's web site. Covered airports would be required to provide
information on these initiatives in their competition plans and to
justify any differences in the fees and/or terms of use imposed on
existing and prospective carriers, respectively, and on any failure to
provide access within 90 days of a carrier's request. Non-covered
airports would be encouraged to adopt these initiatives and procedures
and would be expected to rectify any practice that is found to hinder
access. This section would also provide explicit authority to the
Secretary for disapproval of a competition plan and would establish
hearing procedures for covered airports whose AIP entitlement funds are
withheld based on a competition plan disapproval.
Senator Shelby. Mr. Secretary, this will be my last
question hopefully. This is in the transit area.
TRANSIT REAUTHORIZATION
I must tell you that I am disappointed in what I am hearing
about the transit reauthorization. I am especially interested
in transit this year because, as you know, I chair the Banking
Committee and I am involved with Senator Murray very much in
transit on this committee. I would hope that you would take a
fresh look, Mr. Secretary, at the transit program and propose
modifications that would improve rural connectivity, improve
project oversight, provide more tools and options for States,
urban centers, and localities in dealing with their transit
challenges, and to nudge the program toward providing
comprehensive transportation solutions as opposed to transit
band-aids.
I would have thought that the budget constraints you faced
in formulating your proposals would have pushed you at least in
some of these directions. I am hearing that the only thing the
Administration's proposal is likely to do is call for greater
reliance on formula programs, and for program growth to come
from innovative financing. That concerns me. What is innovative
financing? Can you tell us what considerations you think are
most important in improving the transit program?
Secretary Mineta. First of all, this has been an interest
of mine for quite awhile. As you will recall, when we had ISTEA
we changed the name of UMTA, the Urban Mass Transit
Administration to FTA, the Federal Transit Administration, in
order to point out that transit is not only an urban matter but
it is a rural issue as well. This has been an interest of mine,
and this year in our 2004 submission we increase. For transit
we increase that by 20 percent as it relates to rural areas.
That includes the rural representation on MPOs as well in terms
of how rural representation gets treated in the MPOs.
So I think that what we are trying to do is to make sure
that there is what you refer to as rural connectivity. This is
something that the Administration is interested as well.
Senator Shelby. Thank you. Senator Murray.
AIRLINE INDUSTRY SUBSIDIES
Senator Murray. Thank you, Mr. Chairman. I just have one
comment and one question. My comment is that I second what
Senator Brownback was discussing with you in terms of the
airline industry. We are deeply concerned about the impact of
subsidies, and I hope that you pursue this with the Trade
Secretary Representative, Ambassador Zoellick, and have a
conversation with him about this because I think we are setting
ourselves up for a very bad place if we do not seriously take a
look at this. I look forward to working with you on that.
SOUTHERN BORDER
Let me just ask you, because 2 years ago this subcommittee
imposed a number of strict new safety requirements that had to
be met before you could allow Mexican trucks into the United
States. According to the IG, you have fulfilled every one of
those safety requirements. But as soon as that took place, the
Ninth Circuit Court of Appeals ruled that you could not open
the border because the Administration never prepared the
required environmental impact statement. Just a few weeks ago,
you asked the Ninth Circuit to rehear that case. Your request
was denied and you now appear to have a choice between
appealing to the Supreme Court on this or going forward and
preparing the environmental impact statement. I wondered which
course you were going to take?
Secretary Mineta. We have not decided that yet. We have
until the 9th of July, I believe, in order to make a decision.
Senator Murray. If the Supreme Court hears an appeal, it is
likely that you will not get a decision well into 2004. Have
you looked at the fact that it might be much more timely to go
ahead and do the environmental impact statement?
Secretary Mineta. I think we are looking right now at the
time that it would take to complete the environmental impact
statement (EIS) as compared to appealing. We have not come to a
decision yet on which approach to take.
Senator Murray. Thank you, Mr. Chairman.
Senator Shelby. We are joined by Senator Stevens, the
chairman of the full committee. Senator Stevens.
STATEMENT OF SENATOR TED STEVENS
Senator Stevens. Thank you very much. It is nice to see
you, Mr. Secretary.
Secretary Mineta. Good to see you, sir.
TRUCK MONITORING
Senator Stevens. I am searching right now for the name of
the program that was described to me yesterday that Alaska is
not included in. It is a program whereby trucks are monitored
throughout the southern 48 States that contain hazardous
substances. I was just notified yesterday that the trucks that
come up to Alaska through Canada and up the Alaska Highway into
Alaska do not have that program. I am sorry, I just do not
remember the name of it.
I did not know that, and one of the reasons is, of course,
our trucks pass through Canada and it is a satellite tracking
program to make sure that we have absolute control over those
trucks that contain hazardous materials. There are only a few
of those trucks that come up to Alaska that are Department of
Defense. Most of the Defense-oriented transportation comes by
barge and goes up the Alaska railroad. But there are a
considerable number of private concerns that do use that
tracking system to bring these trucks into Alaska. I wanted to
call it to your attention and urge your review of it because it
is my understanding that the Defense Department is unwilling to
spend money for this system to go to Alaska since they have
such a small portion of coverage as far as hazardous materials
coming to Alaska by truck; virtually none, as a matter of fact.
Secretary Mineta. Senator, I will have to look into that
matter and get back to you.
TRACKING OF HAZARDOUS MATERIAL
Senator Stevens. I apologize. A senior moment here. I
cannot remember the name of the program. But I do hope, Norm,
you will look at it because we did not know--we have a
considerable amount of hazardous material that comes into
Alaska. It is a very tough thing to get it through Canada as a
matter of fact. But I think if we provided this tracking system
it might improve our relationship with our neighbor, but
certainly it has something to do with rates for the people who
have those trucks. If they do not have this coverage, the rates
for insurance are much higher.
So I am speaking really for the trucking industry from the
State of Washington that primarily brings hazardous materials
into our State. It is something that was just never called to
our attention and I would like to find some way to cure it.
They have asked us to add $4 million to your budget. That is
what I am here for, to cover the cost of adding that satellite
coverage for hazardous material tracking as it comes through
Canada and through Alaska. I would appreciate it if you get the
time----
Secretary Mineta. I will look at it and get back to you,
Mr. Chairman.
[The information follows:]
FMCSA has a $2.5 million on-going operational field test of
vehicles with security technologies, including satellite tracking that
involves 100 trucks from 8 trucking companies, 4 shippers, and 4
consignees of hazardous materials in various segments of the hazardous
materials industry. The goal of the project is to demonstrate the
effectiveness of technologies in improving both safety and security,
and to quantify the costs and benefits of implementing these
technologies in the HAZMAT industry. In addition, FMCSA is about to
commence a $2 million project to demonstrate satellite tracking of
untethered trailers.
Another related initiative is FMCSA's Supplemental Notice of
Proposed Rulemaking to establish a Federal HM permit program for
carriers of the most dangerous hazardous materials. As part of this
proposed rulemaking, currently in Departmental review, FMCSA is
considering a requirement for carriers of these materials have a system
to communicate with the driver. We expect that satellite tracking and
communications systems will be widely used to satisfy this requirement.
In addition, the Research and Special Programs Administration (RSPA) is
working on a Notice of Proposed Rulemaking that may require
communication systems for larger numbers of hazardous materials
shipments.
DOT is undertaking demonstration projects to promote the safety,
security, and efficiency benefits of satellite tracking systems for the
trucking industry. We believe that through projects such as our two
demonstration projects the industry will, on its own accord, begin to
incorporate these technologies. The implementation of these systems
will likely be further promoted as the Department finalizes security
regulations for hazardous materials. As the untethered trailer tracking
demonstration project is still in the planning phase, we will examine
whether Alaska is an appropriate venue for this effort.
Senator Stevens. I will find that name, Norm, and send it
to you today. Thanks.
Senator Shelby. Thank you, Senator Stevens.
ADDITIONAL COMMITTEE QUESTIONS
Mr. Secretary, we appreciate your appearance today. We know
we have asked some questions that you will answer for the
record.
Secretary Mineta. Yes, sir.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Richard C. Shelby
INFRASTRUCTURE AND PERFORMANCE MAINTENANCE INITIATIVE
Question. Has the Department identified any specific examples of
the types of facilities that would be funded if the new
``infrastructure performance and maintenance initiative'' were
authorized? If so, could you provide those examples to the Committee?
Answer. The intent of the Infrastructure Performance and
Maintenance (IPAM) initiative is to focus the use of Federal funds on
two types of Federal-aid highways projects: system preservation and the
elimination of chokepoints. System preservation projects include a
range of activities from preventative maintenance (e.g., cleaning and
resealing of pavement joints or the restoration of rust resistant
bridge paint) to minor reconstruction. During TEA-21, the States made
good investments in system preservation, and the physical condition of
highways and bridges has improved. The system preservation component of
IPAM should help maintain this positive trend.
The second category of eligibility under IPAM would be the
elimination of traffic chokepoints. IPAM spending for congestion
reduction would be targeted to traffic bottlenecks, not the widening of
long stretches of highway. Likely projects would include intelligent
transportation initiatives and the limited alteration of existing
facilities. This would include improvements to interchange ramp, added
auxiliary lanes, short sections of added through lanes and intersection
modernization.
In either case--system preservation or chokepoint elimination--the
goal is to fund projects that are ready to go and that can be completed
in a relatively short timeframe, providing timely improvements for the
Nation's road users.
HIGHWAY SAFETY INITIATIVES
Question. The Department's budget appears to propose a safety
program that is very different from the programs of the past. Knowing
that both Click-It-or-Ticket mobilizations and impaired driving
mobilizations have proven to be extremely successful the Department
still chose to specifically exclude them from the budget request. What
then is being proposed that will yield even better results?
Answer. The National Highway Traffic Safety Administration (NHTSA)
intends to continue the ``Click It or Ticket'' and ``You Drink & Drive.
You Lose.'' mobilizations in 2004, and beyond. Early in calendar year
2003, NHTSA solicited input from the Governors Highway Safety
Association and the highway safety offices of the fifty States, the
District of Columbia and Puerto Rico. Given the solid commitment to
continuing the mobilizations that was expressed, NHTSA does not believe
that it is necessary to earmark grant funds to the States for this
purpose. States can use their Section 402 grants funds to support these
efforts.
AMTRAK REFORM PROPOSAL
Question. Mr. Secretary, as I mentioned in my opening statement, we
are all eagerly awaiting an Amtrak Reform proposal. You talked about it
last year, Michael Jackson has talked about it this year and we have
yet to see a concrete proposal. When may we expect some type of formal
legislative proposal for Amtrak reform?
Answer. The Secretary of Transportation transmitted the
Administration's intercity passenger rail legislative proposal--The
Passenger Rail Investment Reform Act of 2003--to Congress on July 28,
2003.
SHIP DISPOSAL
Question. The Maritime Administration is tasked with the disposal
of all obsolete vessels from the National Defense Reserve Fleet by
September 30, 2006. There are more than 130 vessels presently in the
fleet awaiting disposal, and MARAD has only disposed of 14 vessels over
the past 3 years.
I would like for you to keep me updated on how you plan to
accomplish this task. This is a serious and expensive endeavor that
really needs to be resolved.
How does MARAD plan to dispose of these vessels by the statutory
deadline? If additional vessels are accepted from the Navy and other
sources, what strategies does MARAD have in place for the fleet to keep
the program on schedule?
Answer. As the Federal Government's ship disposal agent, MARAD
acquires obsolete ships into its fleets on a continuous basis.
Additional vessels to the 130 already in custody will significantly
increase the disposal challenge faced by MARAD. MARAD's only disposal
options from 1994-2000 were domestic ship sales and occasional ship
donations, which resulted in 12 vessel sales for recycling and 5 vessel
donations. Prior to 2001, MARAD did not have the authority to pay for
dismantling services; thus, there was no ship disposal budget. The
vessels that accumulated in the 1990's (the backlog) are now in poor
condition, and account for approximately 75 of the 130 ships on hand.
Disposal of the vessel backlog, while acquiring even more obsolete
vessels, is a significant challenge.
The deadline of September 30, 2006, established in the National
Defense Authorization Act of 2001, will be difficult to reach because
the Fleet is projected to receive 15 additional ships in each of the
next 3 years. When this goal was established 2 years ago, there were
115 vessels in the Fleet. Since then, 16 vessels have been removed;
however, MARAD received an additional 31 obsolete ships during that
period.
The program priority remains focused on disposal of MARAD's 27
high-risk, non-retention vessels (20 in the James River Reserve Fleet
(JRRF), Virginia; 5 in the Suisun Bay Reserve Fleet, California; and 2
in other locations--Mobile, Alabama, and Portsmouth, Virginia).
MARAD anticipates removing a minimum of 25 vessels from the Fleet
through domestic and export disposal recycling using the fiscal year
2003 appropriation of $11.1 million, coupled with $20 million in
funding from the Department of Defense. Proposals received thus far for
the export of ships for recycling clearly indicate that export is the
most cost-effective method because of higher demand for recyclable
materials, lower labor costs, greater industrial capacity and greater
competition. The ability to export ships for recycling will expedite
the elimination of high-risk ships, significantly mitigate the
environmental threat of oil discharge at the Fleet sites, and reduce
the total number of obsolete vessels significantly.
Ship disposal methods currently available, and the industry's
response to MARAD's announcements, indicate that the cost-effectiveness
of ship dismantling is based on economies of scale. The current
contract with the United Kingdom involving the removal of 15 ships for
$14 million is one example--the higher the number of ships, the greater
the yield of steel and other recyclable materials. Many of the Program
Research & Development Announcement (PRDA) proposals involving export
contain costs to the Government that are significantly lower than
current and anticipated costs for domestic dismantling. While the
domestic dismantling industry has limited capacity, higher costs and
limited competition, MARAD is currently in the process of awarding
contracts to four domestic companies to recycle 10 ships. Ship
dismantling/recycling is heavy industrial work--low tech and labor
intensive. It involves the handling and disposition of hazardous
materials, and thus has some inherent risks regardless of where the
work is done. Although foreign facilities are not subject to worker and
environmental laws as domestic facilities are, the foreign industry
must demonstrate to MARAD and the EPA that they can accomplish
responsible vessel recycling that protects worker safety and health.
Other initiatives include:
(a) National environmental best management practices (BMP) for
preparing vessels for use as artificial reefs.--This is an interagency
effort involving MARAD, the Environmental Protection Agency (EPA),
Navy, United States Coast Guard, National Oceanic and Atmospheric
Administration, Army Corps of Engineers, National Marine Fisheries, and
other agencies, that MARAD initiated in 2002 with a projected
completion in the spring of 2004. Establishing best practices will
standardize the ship preparation guidelines on a nationwide basis, thus
facilitating the application and vessel preparation processes, and
aiding the States and MARAD in estimating the costs associated with
ship preparation for artificial reefing.
(b) Fuel removal for JRRF vessels.--MARAD continues to assess the
risks associated with the removal of oil from obsolete ships prior to
disposal. A PRDA was posted in fiscal year 2003; however, the proposals
received did not offer any technologies, methodologies or innovations
to make oil removal a cost-effective option. MARAD's policy has been
that the safest and most cost-effective method of removing oil, and
thus mitigating the risk of oil discharges from our obsolete ships, is
to remove the oil during the ship dismantling process and not
beforehand. MARAD continues to pursue opportunities to assess the
feasibility and cost-effectiveness of oil removal technologies beyond
traditional pumping methods. The goal is to identify cost-effective
methods for the safe removal of some fuels, while the vessels are
awaiting disposal. Heretofore, traditional oil pumping methods have not
been cost-effective in removing significant quantities of oil to
mitigate the threat of oil discharges into the environment.
(c) Streamlining the artificial reefing application review and
approval process.--The current application process required of coastal
States to acquire vessels to be used as reefs, and the subsequent
Federal agency review and approval process, is cumbersome and time
consuming. MARAD, jointly with all the Federal agencies involved in the
artificial reefing process, is working to streamline the process.
(d) Discussions with the Mexican Government.--MARAD and EPA are
exploring opportunities that mutually benefit Mexican vessel recycling
facilities and MARAD, by providing a possible source of cost-effective
and environmentally responsible vessel recycling.
(e) Global Action Program (GAP).--MARAD has begun preliminary
discussions related to partnering with interested Basel Convention
countries, the International Maritime Organization, and the
International Labor Organization in an international program to promote
environmentally responsible and sustainable ship disposal.
(f) Army Corp of Engineers (ACOE) and Louisiana barrier island
stabilization using obsolete vessels.--MARAD has held preliminary
discussions with the ACOE related to a potential pilot project and
feasibility study to test the effectiveness of using obsolete vessels
to stabilize the shorelines of barrier islands.
HIGHWAY-RELATED FATALITIES
Question. The Department's goal for highway-related fatalities in
2004 is 1.38 per 100 vehicle miles traveled. The budget seems to
indicate that the two major reasons for the lack of significant
progress in reducing overall highway-related fatalities can be directly
attributed to motorcycles and pedestrians. What then is the Department
doing to address and reduce the number of fatalities between these two
groups? I ask because the budget appears to assume a steady rate among
these groups and a necessity to focus on passenger cars and light
trucks.
Answer. NHTSA's fiscal year 2004 budget request addresses the
action items in the NHTSA Motorcycle Safety Program document released
in January 2003 and the National Agenda for Motorcycle Safety developed
in collaboration with motorcycle safety partners.
A new fiscal year 2004 initiative will address a concern that
motorcycle training programs accommodate all those who seek training.
NHTSA plans to work with identified State rider education and training
programs to develop and implement long-range strategic plans to make
training available for all those who need it and in a timely fashion.
NHTSA will continue research on motorcycle lighting as a means to
improve motorcyclist conspicuity and will continue research on
motorcycle braking systems.
Additionally, NHTSA will: conduct research on crash avoidance
skills; conduct research on motorcyclists conspicuity; support projects
to reduce impaired riding by developing and testing activities that may
include peer-to-peer efforts, social norm models, enforcement efforts,
and motorcycle impoundment; and collect and analyze motorcycle crash,
injury, and fatality data and compare motorcyclists who successfully
completed formal rider training to those who have not.
Pedestrian crashes are addressed through a combination of public
information, legislation, enforcement, engineering, and outreach
strategies. NHTSA will: fund competitive demonstration projects
designed to involve the law enforcement community to improve pedestrian
safety; develop a community guide to tackle the challenges of
implementing comprehensive pedestrian safety programs; explore the
feasibility of developing and disseminating a school crossing guard
curriculum; and develop community-level Safe Routes to School workshops
to increase pedestrian safety around schools.
NHTSA will also disseminate tools to encourage communities to
promote safe walking. Non-traditional partners, such as smart growth
coalitions or local government commissions, will be identified and
encouraged to incorporate pedestrian safety into their organizations'
missions. NHTSA will continue its partnership with the Federal Highway
Administration to incorporate infrastructure improvements with
behavioral safety principles.
REQUIREMENTS FOR AMTRAK TO RECEIVE FEDERAL SUBSIDY
Question. The Fiscal Year 2003 Appropriations Act placed a number
of new requirements on Amtrak's ability to obtain their Federal
subsidy. What, if any changes to those requirements would you propose
to improve the Department's oversight of the railroad for the 2004
bill?
Answer. The Fiscal Year 2003 Appropriations Act's new requirements
on grants to Amtrak are built upon reforms required by the Department
as conditions to the fiscal year 2002 loan under the Railroad
Rehabilitation and Improvement Financing (RRIF) program. These
requirements have resulted in a significant improvement in the way
Amtrak does business and should be continued. While additional reform
is needed in the way intercity passenger rail service is provided in
this country, such reforms should be part of comprehensive
authorization legislation and are included in the legislation that the
Secretary of Transportation transmitted to Congress.
PATRIOT ACT
Question. The Patriot Act requires a background check on all
drivers transporting Hazardous Materials. When TSA was transferred to
the Department of Homeland Security, the background investigative
authority for the HAZMAT endorsement was also transferred as was the
ability to grant that endorsement to CDL holders. However, the
Department has requested money in the 2004 budget to continue to pay
for these background checks. While I recognize that there is an
outstanding contract between Motor Carriers and Lexis-Nexis to provide
these services, I am concerned that this will be an ongoing request in
future budgets. What is the Department doing to work with TSA to
transfer this financial responsibility as well?
Answer. The Fiscal Year 2004 President's Budget includes $3 million
for FMCSA to implement Section 1012 of the Patriot Act. These funds
would be obligated for the existing Lexis-Nexis contract. The
Department has developed a memorandum of understanding between TSA and
FMCSA, with FMCSA delegating day-to-day contractual administrative
management responsibilities to TSA for the Lexis-Nexis contract. There
will be no further financial responsibility for the Department beyond
fiscal year 2004.
IMPROVING PAVEMENT RIDE QUALITY
Question. One of the Department's Strategic and Performance Goals
is to increase the percent of pavement on the National Highway System
with acceptable ride quality to 93.1 percent. Can you tell me how, with
less highway funding, this budget proposes to reach this goal?
Answer. The Department's performance goal for 2004 is to increase
the percent of travel with acceptable ride quality on the National
Highway System to 93.0. In addition to normal Federal-aid construction
funds, the Department proposes to utilize research and technology funds
to develop products and deliver technology that will improve pavement
smoothness during initial construction and pavement ride quality over
the life cycle of highways. Specific examples include improved pavement
smoothness specifications, best practice guides for construction,
improved pavement profile measurement equipment and profile analysis
software.
Additionally, specific initiatives will be focused on the 10 States
where 76 percent of the travel on highways with unacceptable ride
quality exists. The Department will initiate development and delivery
of customized workshops focused on addressing specific needs in these
States.
HIGHWAY PERFORMANCE AND MAINTENANCE INITIATIVE (IPAM)
Question. The budget purposes a new, $1 billion highway performance
and maintenance initiative which targets ``ready-to-go'' highway
projects that address traffic bottlenecks and improve infrastructure
conditions. How will the funds be distributed to the States? What
specific guidance will be given for expenditures of the funds? Will
States be allowed to reimburse themselves for already completed
projects meeting the required criteria? In developing this new
initiative were any specific projects identified that would meet the
criteria? If so, could you provide a list of those projects and the
characteristics that qualify them for the new initiative?
Answer. The funds would be distributed by formula with 25 percent
of the funds distributed based on each State's relative share of
Federal-aid lane-miles, 40 percent based on each State's relative share
of vehicle-miles of travel on Federal-aid highways and 35 percent based
on each State's relative share of contributions to the Highway Account
of the Highway Trust Fund. There would be a one-half percent minimum
for each State. This formula is the same as is being used for the
Surface Transportation Program.
States would have 6 months to obligate their IPAM funds. This is
consistent with the requirement that the funds be used for ready-to-go
projects. After the 6-month deadline, un-obligated funds would be
withdrawn from States and distributed to other States that could
obligate the funds by the end of the fiscal year. We do not anticipate
that States will find it difficult to comply with the 6-month
timeframe.
States would not be allowed to reimburse themselves for projects
meeting the required criteria that are already completed or are already
underway using the advance construction provisions of title 23. The
intent of the IPAM program is to quickly initiate and deliver projects
and their benefits to the public. Allowing the use of IPAM funds to
reimburse already completed projects or projects that are already being
advanced using other approaches would defeat this intent.
Program guidance would also clarify eligible projects for IPAM
funds by further defining the types of projects that would be eligible.
The selection of projects to be carried under the IPAM program would be
a State prerogative.
The IPAM does not create new eligibilities for Federal-aid highway
funds. The intent is to focus the use of Federal funds on two types of
projects on Federal-aid highways, system preservation and the
elimination of chokepoints. System preservation projects include a
range of activities from preventative maintenance to minor
reconstruction. During TEA-21, States made good investments in system
preservation and the physical condition of highways and bridges has
improved. The system preservation component of IPAM should help
maintain this positive trend.
The second category of eligibility under IPAM would be the
elimination of traffic chokepoints. Reducing congestion is a great and
costly challenge. IPAM spending for congestion reduction would be
targeted to traffic bottlenecks, not the widening of long stretches of
highway. Likely projects would include intelligent transportation
initiatives and the limited alteration of existing facilities. This
would include interchange ramp improvements, added auxiliary lanes,
short sections of added through lanes and intersection modernization.
ADDITIONAL FTE'S
Question. The budget requests 12 new FTE for the purposes of
``enhancing the oversight of major projects; improvements to the
security of our critical information systems; upgrades to our
information technology infrastructure; and FHWA's share of the costs to
consolidate all DOT modes located in Lakewood, Colorado, into one
facility.'' Could you provide a breakdown of exactly how these new FTE
will be utilized in each of the areas specified in the description?
Provide a prioritization for each of these 12 FTE based upon need.
Answer. The 12 FTE that are requested in fiscal year 2004 will be
used specifically to enhance major projects oversight and fulfill
FHWA's commitment of having a dedicated oversight project manager on
each mega-project. All 12 FTE are considered equal and will be used as
environmental commitments of the projects are entered into.
FHWA will designate Mega-Project Oversight Managers who are
personally accountable for proper Federal oversight and establish
Integrated Product Teams to assist the oversight manager. The addition
of the 12 FTE is essential for FHWA to perform its stewardship and
oversight role. The responsibilities of each mega-project oversight
manager include:
--Representing FHWA before other Federal agencies, State
Transportation Agencies (STA), local agencies, consultants, and
contractors on all project delivery and oversight issues.
--Briefing FHWA upper management, the Office of the Secretary of
Transportation, and the media on project status, and
significant project activities and issues.
--Monitoring environmental commitments and ensuring that they are
incorporated into the plans and specifications.
--Overseeing the review and approval of plans, specifications, and
estimates for appropriate application of design standards and
criteria, conformance with policies and regulations, traffic-
safety features, reasonableness of estimated costs, and proper
specifications and other contract provisions.
--Monitoring and reporting cost and schedule changes and updates,
analyzing project status for reasonableness and accuracy, and
managing changes to minimize impacts to costs and schedules.
--Ensuring cost containment strategies such as value engineering,
constructability reviews, design-to-cost strategies, and up-
front planning to minimize contractor risks are incorporated.
Coordinating with FHWA bridge engineers for design reviews of
major structures.
--Ensuring FHWA laws and requirements for Federal-aid construction
contracts are incorporated, such as Buy America, Davis-Bacon
minimum wage rates, Disadvantaged Business Enterprise and
affirmative action requirements, records of materials and
supplies, etc.
--Conducting project inspections to verify compliance with standard
engineering practice, and providing technical assistance.
--Providing assistance and direction to the STA on the proper
application of Federal funds, designated funding, and
innovative financing programs.
--Reviewing the Initial Finance Plan and Annual Updates, coordinating
with the STA and Headquarters Office, and ultimately accepting
the initial plan and updates.
--Promoting technology transfer to and from the project.
FISCAL YEAR 2004 FTE REQUIREMENT FOR ACTIVE (AND FUTURE) MAJOR PROJECTS
----------------------------------------------------------------------------------------------------------------
Current Fiscal Year
Projects Status Staffing Level 2004
----------------------------------------------------------------------------------------------------------------
I-80/San Francisco-Oakland Bay Bridge (East Active......................... 1 1
Span), CA.
SR 210/Foothill Freeway........................ Active......................... .............. ..............
I-25/I-225 Southeast Corridor, CO.............. Active......................... 1 1
New Haven Harbor Crossing, CT.................. Active......................... .............. 1
Miami Intermodal Center, FL.................... Active......................... .............. 1
I-4/I-275 Tampa Interstate, FL................. Active......................... .............. 1
New Mississippi River Bridge, IL-MO............ Active......................... .............. 1
Central Artery/Ted Williams Tunnel, MA......... Active......................... 5 3
Central Texas Turnpike, TX..................... Active......................... 1 1
I-10/Katy Freeway, TX.......................... Active......................... .............. 1
I-95/Woodrow Wilson Bridge, MD................. Active......................... 2 2
I-95/I-495 Springfield Interchange, VA......... Active......................... 1 1
I-64/Hampton Roads Third Crossing, VA.......... Active......................... .............. 2
I-94/East-West Corridor, WI.................... Active......................... .............. 1
New Ohio River Bridges, KY-IN.................. Future......................... .............. 1
I-94/Edsel Ford Freeway, MI.................... Future......................... .............. 1
Mon/Fayette Expressway, PA..................... Future......................... .............. 1
I-635/LBJ Freeway (West Section), TX........... Future......................... .............. 1
I-405 Corridor/SR 509 and I-5/SR520/Alaskan Way Future......................... .............. 2
Viaduct, WA.
----------------------------------------------------------------
Totals................................... ............................... 11 23
----------------------------------------------------------------------------------------------------------------
INTELLIGENT VEHICLE INITIATIVE
Question. The budget request discusses an example of an Intelligent
Vehicle Initiative (IVI) to develop driver assistance systems that will
reduce the number and severity of crashes and goes further to discuss
systems currently under development to ``warn drivers of dangerous
situations and recommend corrective actions, or in some cases, even
assume partial control of vehicles to avoid collisions.'' Where is this
research being conducted, who is participating and when do you
anticipate the research will be completed? Additionally, is there a
coordinated effort with the automobile manufacturers to develop and
test these systems?
Answer. The work under the IVI program is being conducted in a
series of coordinated contracts and cooperative agreements with the
Department of Transportation's (DOT) partners in the public and private
sectors, as well as universities and other research institutions. DOT's
partners were chosen because they are the critical organizations needed
to develop and deploy effective systems. They include seven of the
largest automobile manufactures (General Motors, Ford, Daimler-
Chrysler, Toyota, Nissan, BMW and Volkswagen), the largest technology
suppliers to the U.S. automotive industry (Delphi Delco, Visteon, TRW
and DENSO), heavy truck manufacturers (Freightliner, Mack, Volvo
Trucks, and Navistar International), the State Departments of
Transportation for California, Minnesota and Virginia, and finally
several commercial and transit fleet operators.
Under the IVI program, DOT is working on crash countermeasures that
address the largest types of crashes (rear-end, road departure,
intersection and lane change) and the factors that cause the crashes.
The understanding of the crash problem and development of effective
solutions varies in levels of maturity. Consequently, the IVI program
is a long-term effort that is designed to produce incremental results.
DOT's previous efforts already have led to the deployment of vision
enhancement, adaptive cruise control and lane tracking systems. DOT's
current activities are expected to support deployment of rear-end and
road-departure collision-avoidance systems for passenger cars in the
next 2 to 5 years. Intersection collisions are a more complicated
problem that will require vehicle and infrastructure cooperative
systems. Therefore, DOT does not expect these systems to be available
for 8 to 10 years.
The IVI program coordinates with automobile manufacturers at
several levels. Overall strategic planning is coordinated through a
Light Vehicle Industry Federal Advisory Committee Panel. DOT is working
with a partnership of General Motors, Ford, Daimler-Chrysler, Toyota,
Nissan, BMW and Volkswagen to study various enabling research issues.
We are currently conducting studies with this partnership on driver
workload, forward collision warning, enhanced digital maps and
dedicated short-range communications (DSRC). DOT is also working
directly with General Motors and Delphi-Delco on a Field Operational
Test of Rear-end Collision Avoidance Systems for passenger cars. We
also have a Field Operational Test for Road Departure Collision
Avoidance Systems for Passenger cars with Visteon.
ADOPTION OF SAFETY COUNTERMEASURES
Question. One of FHWA's anticipated accomplishments is a ``greater
adoption and understanding by States of the safety benefits of
countermeasures, including rumble strips and related roadside hardware,
particularly on rural roads.'' What percentage of highway fatalities
does FHWA attribute to hazardous roadway conditions? What specific
programs will FHWA pursue with the States to promote these particular
countermeasures? Will FHWA encourage States to utilize a majority of
their safety funding for this purpose? If not, how will FHWA ensure
greater adoption of countermeasures by the States?
Answer. J.R. Treat's ``Indiana Tri-Level Study--A Study of Pre-
Crash Factors Involved in Traffic Accidents'' attributes 34 percent of
highway crashes to the roadway as a cause or contributing factor.
Treat's study is based on on-site reviews of actual highway crashes.
The study recognizes that many crashes involve multiple factors related
to the roadway, the driver and the vehicle. The percentages include
crashes where there is more than one causal factor.
FHWA pursues a number of programs to address infrastructure-related
safety opportunities. One key area of focus is working with the
American Association of State Highway and Transportation Officials
(AASHTO) on the development and implementation of guidebooks which
address areas of emphasis within the AASHTO Strategic Highway Safety
Plan. Several of these areas of emphasis address roadway and roadside
features, including newly-released guidebooks on run-off-road
collisions, collisions in intersections without signals, head-on
collisions, and collisions involving trees in hazardous locations.
In addition to these partnering efforts with the AASHTO, FHWA
issued a Technical Advisory on shoulder rumble strips last year to help
States design and install them on rural National Highway System
segments. The Mississippi Department of Transportation installed and
tested different rumble strip designs combined with pavement marking
overlays on rural roads. Initial evaluations indicate improved safety
on rainy nights due to more visible pavement markings and audible
rumble strip warnings. Also, FHWA reviews crash test data on new
roadside hardware to verify its effectiveness and compliance with
current crash test evaluation criteria. To provide States, local
agencies and other interested parties information on which roadside
hardware can be used safely, FHWA posts letters of acceptance for new
hardware on its roadside safety website, http://safety.fhwa.dot.gov/
report350hardware. Since 1998, over 240 letters have been posted on
guardrails, bridge rails, crash cushions, sign and light poles and work
zone traffic devices.
FHWA encourages States to use their safety funding for a variety of
safety countermeasures based on a strategic approach to highway safety
that identifies key problems and the most effective countermeasures.
For example, studies on two-lane rural highways show that crash rates
decline as shoulders are added or widened. Rumble strips may not be the
most effective countermeasure on these narrow roads. Each State must
identify and evaluate its particular safety needs to make the best use
of its safety funding. FHWA is working with States to develop goals and
performance measures to improve their safety performance. Accurate data
on crash causation forms the basis of a strategic approach to highway
safety that also encourages State adoption of effective
countermeasures.
STATE SPENDING ON HAZARD ELIMINATION PROJECTS
Question. How much of current highway safety funding is utilized by
States for hazard mitigation projects? Please provide a breakdown for
each State for 2000, 2001 and 2002?
Answer. The chart that follows shows the funds obligated by the
States for hazard elimination projects during fiscal years 2000-2002.
----------------------------------------------------------------------------------------------------------------
State Fiscal Year 2000 Fiscal Year 2001 Fiscal Year 2002
----------------------------------------------------------------------------------------------------------------
Alabama................................................... $597,579.25 $10,461,385.53 $1,385,519.46
Alaska.................................................... 834,666.00 861,301.22 804,812.00
Arizona................................................... 0 1,124,342.00 3,890,823.00
Arkansas.................................................. 2,056,734.00 436,375.00 28,142.00
California................................................ 11,250,001.87 17,940,935.96 16,401,450.91
Colorado.................................................. 2,273,901.00 2,279,921.00 2,389,313.00
Connecticut............................................... 1,705,329.88 1,858,893.25 2,084,266.35
Delaware.................................................. 828,325.00 414,768.35 0
District of Columbia...................................... 0 0 0
Florida................................................... 3,349,934.00 3,516,589.00 5,050,791.00
Georgia................................................... 2,336,036.69 1,902,328.28 542,338.25
Hawaii.................................................... 790,219.00 635,143.00 0
Idaho..................................................... 140,692.00 1,145,248.00 451,065.25
Illinois.................................................. 8,913,513.02 10,305,632.69 8,976,229.72
Indiana................................................... 3,518,335.67 2,229,913.41 1,127,612.56
Iowa...................................................... 450,000.00 2,266,100.00 1,079,943.13
Kansas.................................................... 1,808,724.51 5,146,482.47 3,187,743.50
Kentucky.................................................. 1,936,379.04 1,845,245.72 719,869.66
Louisiana................................................. 1,239,652.00 1,187,013.71 3,901,352.15
Maine..................................................... 1,094,811.91 267,029.07 521,805.41
Maryland.................................................. 0 3,264,098.00 2,619,436.00
Massachusetts............................................. 0 0 0
Michigan.................................................. 8,279,378.92 10,087,363.35 8,781,312.87
Minnesota................................................. 3,282,132.09 1,962,307.15 5,321,754.92
Mississippi............................................... 4,018,145.00 2,072,571.00 1,981,001.00
Missouri.................................................. 6,067,894.55 7,803,017.92 4,541,348.70
Montana................................................... 1,538,908.82 1,281,269.85 1,294,459.86
Nebraska.................................................. 502,392.48 1,474,977.84 1,009,775.23
Nevada.................................................... 65,112.40 276,392.79 2,175,028.65
New Hampshire............................................. 775,905.97 899,448.32 812,840.72
New Jersey................................................ 5,030,912.00 143,842.00 4,117.00
New Mexico................................................ 0 0 0
New York.................................................. 12,842,632.00 9,916,012.00 9,339,778.00
North Carolina............................................ 4,530,423.00 4,714,589.00 7,392,083.00
North Dakota.............................................. 896,162.06 620,700.44 476,702.67
Ohio...................................................... 6,858,605.00 6,858,605.00 6,773,562.00
Oklahoma.................................................. 2,540,771.10 2,320,514.07 1,193,435.63
Oregon.................................................... 1,109,536.00 1,642,846.33 1,020,490.96
Pennsylvania.............................................. 2,138,876.83 1,733,185.18 1,781,980.73
Rhode Island.............................................. 859,495.64 196,365.90 1,339,574.70
South Carolina............................................ 2,392,535.29 2,315,590.40 2,279,377.00
South Dakota.............................................. 1,996,928.47 573,514.78 1,765,831.43
Tennessee................................................. 3,211,638.35 2,161,580.31 1,519,477.87
Texas..................................................... 17,222,270.82 13,680,765.93 9,754,310.11
Utah...................................................... -30,240.62 83,489.08 116,520.09
Vermont................................................... 0 0 0
Virginia.................................................. 1,561,569.00 1,804,992.00 3,412,329.92
Washington................................................ 1,556,759.93 649,197.25 2,280,643.14
West Virginia............................................. 0 713,917.00 41,097.00
Wisconsin................................................. 3,872,858.70 899,648.48 4,427,545.59
Wyoming................................................... 487,993.00 1,477,222.00 1,104,907.00
-----------------------------------------------------
Total............................................... 138,734,431.64 147,452,671.03 137,103,799.14
----------------------------------------------------------------------------------------------------------------
INTERSECTION SAFETY
Question. Intersection safety due to cooperative efforts of FHWA,
AASHTO, and ITE has been identified as another anticipated
accomplishment. Will State and local governments also be involved in
this cooperative effort? Could you provide specific examples as to how
intersection safety will actually be accomplished in order to make
intersections safer for pedestrians and bicyclists?
Answer. State and local governments have been involved in the
intersection safety effort from the beginning. State and local
transportation and safety professionals played a major role in
developing the National Intersection Safety Agenda that guides Federal,
State and local efforts to improve intersection safety. Now they are
actively involved in implementing the Agenda. For example, an
intersection safety workshop for State and local professionals was
developed with the active participation of State, local and private
sector transportation and safety professionals.
Another example of State participation in the intersection safety
effort is the research study on the ``Safety Effectiveness of
Intersection Left- and Right-Turn Lanes.'' Ten States--Iowa, Illinois,
Louisiana, Minnesota, Montana, Nebraska, New Jersey, North Carolina,
Oregon, and Virginia--and the District of Columbia provided research
funds and participated in the study. Accurate estimates of the safety
impacts of dedicated intersection turning lanes were developed over 6
years. Rural left-turn lanes reduced crashes by 15 percent to 50
percent. Urban left-turn lanes reduced crashes by 10 percent to 50
percent. Crashes related to left turns are one of the common safety
problems at intersections.
FHWA is pursuing several strategies to make intersections safer for
pedestrians and bicyclists. Local governments and Metropolitan Planning
Organizations are participating in three FHWA demonstration projects to
test and evaluate innovative countermeasures at intersections and to
market the results to other State and local governments. Training for
State and local engineers and planners in how to safely accommodate
pedestrians and bicyclists at intersections is needed. FHWA will work
with its safety partners to develop and promote workshops, conferences
and meetings as well as training materials. To educate young engineers,
teaching materials will be developed for university professors so they
can incorporate pedestrian and bicycle safety into their intersection
design and planning curriculum for undergraduate and graduate students.
FHWA is developing more partnerships with State and local governments,
academia, and private sector organizations to accelerate the
development of expert tools to identify pedestrian and bicyclist safety
problems and potential solutions.
PEDESTRIAN AND BICYCLIST SAFETY AT INTERSECTIONS
Question. The budget states that ``more consideration will be given
to the safety of motorists, pedestrians, bicyclists, workers and those
persons with disabilities in the planning, design and use of
transportation facilities; and roadway users will have a better
awareness of pedestrians and bicyclists.'' Does ``consideration'' also
mean that proactive steps will be taken to actually improve the safety
conditions? If so, what steps will be taken and/or what steps are
planned? How will roadway users gain a greater awareness of pedestrians
and bicyclists?
Answer. FHWA has taken specific steps to improve the safety of all
roadway users including vulnerable populations such as older drivers
and pedestrians. FHWA has been proactive in researching older road
users' needs and capabilities and identifying highway changes that can
improve their safety in using the transportation system. FHWA developed
the ``Highway Design Handbook for Older Drivers and Pedestrians'' with
guidelines that identify design, operational and traffic engineering
enhancements to roadway features that pose safety risks for older road
users, such as intersections. These recommendations make our roads
safer and easier to use for older drivers and pedestrians and all
roadway users. To accelerate implementation of the guidelines, FHWA
developed a workshop for Federal, State and local practitioners to
communicate the results of its research on older road users and the
safety benefits of the older driver and pedestrian guidelines. Four
hundred and forty-seven practitioners have attended workshops in 39
States. A survey of the participants indicates that 54 percent of the
respondents have designed or changed their facilities to accommodate
older road users.
To increase road user awareness of pedestrian and bicyclist safety
needs, FHWA is marketing pedestrian and bicyclist safety awareness
products to State and local governments and private sector safety
organizations. Interactive tools such as ``Safer Journey'' increase
road user knowledge of pedestrian and bicyclist safety problems and
solutions. Seven States have decided to provide copies of the ``Safer
Journey'' CD to all of their elementary schools to increase awareness
of pedestrian and bicyclist safety. English and Spanish pedestrian
safety materials for television, radio, and print media are being
developed as part of a national campaign to raise awareness. FHWA is
developing pedestrian safety materials targeted to specific populations
including Hispanics and Native Americans. FHWA is also expanding its
partnerships with State and local agencies and private sector safety
organizations to accelerate the marketing and distribution of these
pedestrian and safety materials.
STATE STRATEGIC HIGHWAY SAFETY PLANS
Question. FHWA plans to encourage State departments of
transportation to adopt a strategic highway safety plan and a
comprehensive safety planning process. As part of this process, will
FHWA also encourage States to allow Metropolitan Planning Organizations
to participate and integrate them as part of their overall budget? Are
there any States that currently have either a highway safety plan or a
comprehensive safety planning process? If so, could you please provide
a list of those?
Answer. The collaborative process for developing a strategic
highway safety plan requires States to include major State and local
stakeholders. As major stakeholders at the local level, Metropolitan
Planning Organizations would be expected to participate in the process.
State and local agencies and organizations participating the process
are required to share information and assist in the analysis of safety
data to produce a strategic highway safety plan. The development of the
plan would not require changes in the planning processes, plans or
programs of other State or local agencies. An informal survey indicates
that at least 20 States and the District of Columbia have some sort of
a comprehensive safety plan. The 20 States are California, Colorado,
Florida, Illinois, Kentucky, Louisiana, Maryland, Michigan, Maine,
Mississippi, North Carolina, Nebraska, New Jersey, New York, Oregon,
Pennsylvania, Texas, Utah, Washington, and Wyoming.
CONGESTION MITIGATION
Question. FHWA has stated its capability to identify and mitigate
causes of highway congestion. However, the portion of travel that
occurred under congested conditions has increased each year. The short-
term goal appears to be slowing the annual rate of increase to 32.3
percent in fiscal year 2004. What specific actions will FHWA take in
2003 to achieve this goal?
Answer. FHWA knows from surveys that traffic congestion,
particularly that associated with unexpected and non-recurring events
such as work zones and incidents, is aggravating Americans. And the
agency knows from these surveys what matters most to highway users is
the reliability of the system. FHWA has designated congestion
mitigation as one of its ``vital few'' goal areas. Traffic congestion
is influenced by a number of factors outside the influence of the
transportation sector, such as population increases and land use
decisions, but there are a number of areas where FHWA can make a
significant difference in terms of mitigating traffic congestion
levels. Solutions to traffic congestion include building additional
highway capacity (new facilities, added lanes, removing bottlenecks,
etc.), better managing peak demands, and squeezing the highest level of
performance out of existing capacity by effectively managing the
highway system in a customer-focused, performance-based, proactive,
real-time manner. While FHWA has a number of initiatives underway that
focus on this last concept, the following five likely will have the
greatest long-term impact:
1. To date FHWA has not had a means of measuring how well the
operation of the highway system is being managed. In the last 2 years,
FHWA has developed and tested a system reliability index in 21 cities
that it calls the ``buffer index'' (the amount of time added to your
trip because of system unreliability). FHWA hopes that this measure
eventually becomes as well known as (say) the temperature humidity
index and helps cities gauge how well they are doing in responding to
incidents, managing their work zones, and responding to the negative
effects of adverse weather. FHWA will repeat the measurement in up to
10 additional cities both this year and in fiscal year 2004, while it
continues to build support for use of reliability and other appropriate
performance measures in system monitoring and decision-making.
2. FHWA will continue a major program focus on reducing delays
caused by work zones by emphasizing the concept of ``getting in,
getting out and staying out.'' Current and fiscal year 2004 program
activities will be focused on consideration of work zone impacts in the
planning process, innovative design and construction techniques,
traffic control planning, and use of performance measures.
3. FHWA will continue to build the foundation of a national traffic
incident management organization, and develop and share detailed
information, technical guidance and training on procedures to develop
effective incident management programs and effectively respond to
traffic incidents. The overall focus of these efforts is to reduce the
time required to detect, respond to, and clear traffic incidents, which
should result in a significant improvement in the congestion that they
cause.
4. Half the battle of mitigating the real and perceived impacts of
traffic congestion on system users is giving people accurate and
complete information. FHWA is in the process of helping to facilitate
deployment of the 511 national travel information telephone numbers in
cities and States across the United States. Currently about 14 percent
of the U.S. population has access to high quality 511 services, with
access expected to increase to about 25 percent by the end of 2003.
FHWA's fiscal year 2004 goal is to reach 35 percent of the U.S.
population.
5. Finally, it is difficult to effectively manage the
transportation system to mitigate traffic congestion in a culture that
is still very much focused on developing and delivering construction
projects. FHWA is continuing a significant program focus begun in
fiscal year 2002 that seeks to encourage and incentivize regional
collaboration and coordination among transportation system operators
and public safety agencies at all levels of government. Use of the
techniques developed in this program area will result in more extensive
and more effective implementation of regional operations strategies
such as regional traffic incident management programs, regional
traveler information services, inter-jurisdictional coordination of
traffic signals and regional emergency planning and response.
BORDER PLANNING, OPERATION AND TECHNOLOGY PROGRAM
Question. The Border Planning, Operations and Technology (BPOT)
program funds can be used for multimodal planning that results in
improvements in freight movement and highway access to rail, marine and
air services. Can this money be used for actual multimodal improvements
or simply multimodal planning?
Answer. The BPOT funds can be used for an improvement at or near a
land border with Canada or Mexico if the improvement is needed for
operational enhancements or technology applications.
AREAS CURRENTLY ELIGIBLE FOR CMAQ FUNDING
Question. Please identify the areas currently eligible for CMAQ
funding.
Answer. CMAQ funding must be used within non-attainment and
maintenance areas if any exist within the State. If a State has no non-
attainment or maintenance areas, it may use its CMAQ apportionment
anywhere in the State on projects eligible under either the CMAQ or the
Surface Transportation Programs.
FISCAL YEAR 2003 CMAQ-ELIGIBLE NON-ATTAINMENT MAINTENANCE AREAS--STATE
AND COUNTY
------------------------------------------------------------------------
STATE--Nonattainment/Maintenance Area COUNTY--Nonattainment/
Name Maintenance Area Name
------------------------------------------------------------------------
ALABAMA: Birmingham................... Jefferson, Shelby
ALASKA:
Anchorage......................... Anchorage
Fairbanks......................... Fairbanks
ARIZONA: Phoenix...................... Maricopa
ARKANSAS.............................. Anywhere
CALIFORNIA:
Chico-Paradise.................... Butte
Los Angeles....................... South Coast Air Basin, Los
Angeles, Orange, Riverside, San
Bernadino
Sacramento Metro.................. El Dorado, Placer, Solano,
Sutter, Sacramento, Yolo
San Diego......................... San Diego
San Joaquin Valley................ Fresno, Kern, Kings, Madera,
Merced, San Joaquin Valley,
Stanislaus, Tulare
Santa Barbara-Santa Maria-Lompoc.. Santa Barbara
Ventura Co........................ Ventura
Monterey Bay...................... Monterey, San Benito, Santa Cruz
San Francisco Bay Area............ Alameda, Contra Costa, Marin,
Napa, San Francisco, San Mateo,
Santa Clara, Sonoma
COLORADO:
Colorado Springs.................. El Paso, Teller
Denver-Boulder-Greeley............ Adams, Arapahoe, Boulder,
Denver, Douglas, Jefferson
Fort Collins...................... Larimer
Longmont.......................... Weld
CONNECTICUT:
Greater Connecticut............... Hartford, Middlesex, New Haven,
New London, Tolland, Windham
New York-New Jersey-Long Island... Fairfield, Litchfield
DELAWARE:
Philadelphia-Wilmington-Atlantic Kent, New Castle
City.
Sussex............................ Sussex
DISTRICT OF COLUMBIA: Washington, DC- DC
MD-VA.
FLORIDA:
Miami-Ft Lauderdale-W. Palm Beach. Broward, Miami Dade, Palm Beach
Tampa-St. Petersburg-Clearwater... Hillsborough, Pinellas
GEORGIA: Atlanta...................... Cherokee, Clayton, Cobb, Coweta,
DeKalb, Douglas, Fayette,
Forsyth, Fulton, Gwinnett,
Henry, Paulding, Rockdale
HAWAII................................ Anywhere
IDAHO................................. Anywhere
ILLINOIS:
Chicago-Gary-Lake County.......... Cook, DuPage, Grundy, Kane,
Kendall, Lake, McHenry, Will
St. Louis, MO..................... Madison, Monroe, St. Clair
Jersey Co......................... Jersey Co
INDIANA:
Chicago-Gary-Lake County.......... Lake, Porter
Evansville........................ Vanderburgh
Louisville, KY-IN................. Clark, Floyd
Indianapolis...................... Marion
South Bend-Elkhart................ Elkhart, St. Joseph
IOWA.................................. Anywhere
KANSAS: Kansas City KS-MO............. Johnson, Wyandotte
KENTUCKY:
Cincinnati-Hamilton............... Boone, Campbell, Kenton
Edmonson.......................... Edmonson
Louisville, KY-IN................. Bullitt, Jefferson, Oldham
Huntington-Ashland................ Boyd, Greenup
Lexington-Fayette................. Fayette, Scott
Owensboro......................... Daviess, Hancock
Paducah........................... Livingston, Marshall
LOUISANA:
Baton Rouge....................... Ascension, E. Baton Rouge,
Iberville, Livingston, W. Baton
Rouge
Lake Charles...................... Calcasieu
Point Coupee...................... Point Coupee
MAINE:
Hancock & Waldo................... Hancock, Waldo
Knox & Lincoln.................... Knox, Lincoln
Lewiston & Auburn................. Androscoggin, Kennebec
Portland.......................... Cumberland, Sagadahoc, York
MARYLAND:
Baltimore......................... Anne Arundel, Baltimore County,
Baltimore City, Carroll,
Harford, Howard
Kent-Queen Anne's................. Kent, Queen Anne's
Philadelphia-Washington-Trenton, Cecil
PA-NJ-DE-MD.
Washington, DC-MD-VA.............. Calvert, Charles, Frederick,
Montgomery, Prince George's
MASSACHUSETTS:
Boston-Lawrence-Worcester......... Barnstable, Bristol, Dukes,
Essex, Middlesex, Nantucket,
Norfolk, Plymouth, Suffolk,
Worcester
Springfield (Western MA).......... Berkshire, Franklin, Hampden,
Hampshire
MICHIGAN:
Detroit-Ann Arbor................. Livingston, Macomb, Monroe,
Oakland, St. Clair, Washtenaw,
Wayne
Grand Rapids...................... Kent, Ottawa
Muskegon.......................... Muskegon
MINNESOTA:
Minneapolis-St. Paul.............. Anoka, Carver
Dakota............................ Hennepin, Ramsey, Scott,
Washington, Wright
Duluth............................ St. Louis
MISSISSIPPI........................... Anywhere
MISSOURI:
St Louis.......................... Franklin, Jefferson, St.
Charles, St. Louis City, St.
Louis County
Kansas City....................... Clay, Jackson, Platte
MONTANA: Missoula..................... Missoula
NEBRASKA.............................. Anywhere
NEVADA:
Reno.............................. Washoe
Las Vegas......................... Clark
NEW HAMPSHIRE:
Boston-Lawrence-Worcester, NH-MA.. Hillsborough, Rockingham
Manchester........................ Merrimack
Portsmouth-Dover-Rochester........ Strafford
NEW JERSEY:
Allentown-Bethlehem-Easton........ Warren
Atlantic City..................... Atlantic
New York-New Jersey-Long Island... Bergen, Essex, Hudson,
Hunterdon, Middlesex, Monmouth,
Morris, Ocean, Passaic,
Somerset, Sussex, Union
Philadelphia-Wilmington-Trenton... Burlington, Camden, Cumberland,
Gloucester, Mercer, Salem
NEW MEXICO:
Sunland Park...................... Dona Ana
Albuquerque....................... Bernalillo
NEW YORK:
Albany-Schenectady-Troy........... Albany, Greene, Montgomery,
Rensselaer, Saratoga,
Schenectady
Buffalo-Niagara Falls............. Erie, Niagara
Essex............................. Essex
Jefferson......................... Jefferson
New York-New Jersey-Long Island... Bronx, Kings, Nassau, New York,
Orange, Queens, Richmond,
Rockland, Suffolk, Westchester
Poughkeepsie...................... Dutchess, Putnam
Syracuse.......................... Onondaga
NORTH CAROLINA:
Charlotte-Gastonia................ Gaston, Mecklenburg
Greensboro-Winston-Salem-High Davidson, Davie, Forsyth,
Point. Guilford
Raleigh-Durham.................... Durham, Granville, Wake
NORTH DAKOTA.......................... Anywhere
OHIO:
Cincinnati-Hamilton............... Butler, Clermont, Hamilton,
Warren
Canton-Masillon................... Stark
Cleveland-Akron-Lorain............ Ashtabula, Cuyahoga, Geauga,
Lake, Lorain, Medina, Portage,
Summit, Columbus, Delaware,
Franklin, Licking
Dayton-Springfield................ Clark, Greene, Miami, Montgomery
Toledo............................ Lucas, Wood
Youngstown-Warren-Sharon.......... Mahoning, Trumbull
OKLAHOMA.............................. Anywhere
OREGON:
Portland-Vancouver-Salem.......... Clackamas, Multnomah, Washington
Grants Pass....................... Josephine
Kalmath Falls..................... Kalmath
Medford........................... Jackson
PENNSYLVANIA:
Allentown-Bethlehem-Easton........ Carbon, Lehigh, Northampton
Altoona........................... Blair
Erie.............................. Erie
Johnstown......................... Cambria, Somerset
Harrisburg-Lebanon-Carlisle....... Cumberland, Dauphin, Lebanon,
Perry
Lancaster......................... Lancaster
Philadelphia-Wilmington-Atlantic Bucks, Chester, Delaware,
City PA-DE-NJ-MD. Montgomery, Philadelphia
Pittsburgh-Beaver Valley.......... Allegheny, Armstrong, Beaver,
Fayette, Washington,
Westmoreland
Reading........................... Berks
Scranton-Wilkes-Barre............. Columbia, Lackawanna, Luzerne,
Monroe, Wyoming
York.............................. Adams, York
Youngstown-Warren-Sharon.......... Mercer
RHODE ISLAND: Providence (All RI)..... Bristol, Kent, Newport,
Providence, Washington
SOUTH CAROLINA........................ Cherokee
SOUTH DAKOTA.......................... Anywhere
TENNESSEE:
Knoxville......................... Knox
Memphis........................... Shelby
Nashville......................... Davidson, Rutherford, Sumner,
Williamson, Wilson
TEXAS:
Beaumont-Port Arthur.............. Hardin, Jefferson, Orange
Dallas-Fort Worth................. Collin, Dallas, Denton, Tarrant
El Paso, TX....................... El Paso
Houston-Galveston-Brazoria........ Brazoria, Chambers, Fort Bend,
Galveston, Harris, Liberty,
Montgomery, Waller
UTAH:
Salt Lake City-Ogden.............. Davis, Salt Lake
Ogden............................. Weber
Provo-Orem........................ Utah
VERMONT............................... Anywhere
VIRGINIA:
Norfolk-Virginia Beach-Newport Chesapeake City, Hampton City,
News. James City County, New Port
News City, Poquoson, Suffolk
City, Williamsburg City, York
Richmond.......................... Charles City Co., Chesterfield,
Colonial Heights City, Hanover,
Henrico, Hopewell City,
Richmond City
Baltimore-Washington, DC-MD-VA-WV. Alexandra City, Arlington,
Fairfax, Fairfax City, Falls
Church City, Loudoun, Manassas
City, Manassas Park City,
Prince William, Stafford
Smyth............................. Smyth
WASHINGTON:
Portland-Salem.................... Clark
Seattle-Tacoma.................... King, Pierce, Snohomish
Spokane........................... Spokane
WEST VIRGINIA:
Charleston........................ Kanawha, Putnam
Greenbrier........................ Greenbrier
Huntington-Ashland................ Cabell, Wayne
Parkersburg-Marietta, WV-OH....... Wood
WISCONSIN:
Green Bay-Appleton................ Door
Manitowoc......................... Manitowoc
Milwaukee-Racine.................. Kenosha, Milwaukee, Ozaukee,
Racine, Washington, Waukesha
Kewaunee.......................... Kewaunee
Sheboygan......................... Sheboygan
Walworth.......................... Walworth
WYOMING............................... Anywhere
------------------------------------------------------------------------
ECOSYSTEM AND HABITAT CONSERVATION INITIATIVES
Question. The budget states an intention to increase the number of
exemplary ecosystem and habitat conservation initiatives from 8 to 10
in fiscal year 2004 with the long-term goal of 30 initiatives in at
least 20 States or Federal Lands divisions by fiscal year 2007. Could
you identify the 8 existing initiatives where FHWA plans to implement
the additional two in fiscal year 2004 and what, if any, new
initiatives will be attempted?
Answer. There are currently five initiatives that have been
designated to-date. These five initiatives are:
Colorado Department of Transportation's Shortgrass Prairie Initiative
The Colorado Department of Transportation's (CDOT) Shortgrass
Prairie Initiative is a programmatic consultation and proactive
avoidance, minimization, and mitigation effort covering 36 listed and
non-listed species and associated habitats that could be impacted by
CDOT's maintenance and construction activities on Colorado's prairie
over the next 20 years.
Montana Department of Transportation's US 93 Agreement
The new highway was designed with the idea that the road is a
visitor and should respond to and be respectful of the land and Spirit
of Place. Montana DOT, FHWA, and the Confederated Salish-Kootenai
Tribes reached a shared vision of the road's interaction with the
environment and Tribal culture.
North Carolina's Ecosystem Enhancement Program
In order to deal with a rapidly expanding transportation program
that will impact an estimated 6,000 acres of wetlands and a million
feet of streams over the next 7 years, the North Carolina Department of
Transportation, the United States Army Corps of Engineers, and the
North Carolina Department of Environment and Natural Resources are
designing an Ecosystem Enhancement Program to protect the State's
natural resources.
Oregon DOT's Fish Friendly Maintenance Practices
The Oregon DOT has developed a Geographic Information System-based
sensitive resource inventory along nearly 6,000 miles of State highway
as part of its Salmon Resources and Sensitive Area Mapping Project. The
primary purpose of the project is to provide accurate resource
protection maps to roadway maintenance crews so that mowing, pesticide
application, and other activities do not harm listed salmon species and
other sensitive resources.
Washington DOT's Watershed Approach to Mitigation Setting
This watershed approach is a community based environmental decision
making process that uses watersheds as functional systems, coordinating
and integrating human activities to implement watershed recovery
efforts and to prevent further degradation of natural resources within
the watershed basin. A key component of the Washington DOT's watershed
approach is the targeting of mitigation funds to sites offering
greatest ecological benefits.
Detailed information on these five initial initiatives (established
in fiscal year 2002) is available on the FHWA website at: http://
www.fhwa.dot.gov/environment/strmlng/bestprac.htm.
Three additional initiatives are being examined and will be
implemented by the close of fiscal year 2003. These initiatives
include:
Nevada--Regional Wetland Bank
Constructed by the Nevada DOT, this project is on public land,
within sight of a major highway, has public hunting, wildlife viewing
platforms, long-term monitoring, extensive irrigation rights and
control structures and support from agencies. It has been very
successful over a 6-10 year period. It was built as a regional bank for
projects between Reno and Gardnerville.
Arizona--State Route 260 Wildlife Measures
This project in Arizona involves area-wide habitat connectivity
monitoring and measures for wildlife passage. The project is just below
the Mogollon Rim. This area has one of the highest wildlife-vehicle
(primarily elk) collision rates in the State. The Arizona DOT is in the
process of building 17 sets of bridges along 17 miles of highway to
allow wildlife permeability underneath the highway based on extensive
habitat studies interagency coordination. The Arizona Game and Fish
Department has been given the task of monitoring the effectiveness of
these structures. Monitoring will compare the differences in bridge
design based on the number of animals and how readily they use them.
New Hampshire--Route 101 Mitigation Program
The mitigation plan was developed for the New Hampshire DOT project
to improve 17.6 miles of NH Route 101 from Epping to Hampton. This is a
multi-faceted program with measures to minimize impacts to existing
wetland resources, restore estuarine marsh, protect upland habitat,
maintain water quality, preserve and study historic and archeological
sites, minimize highway noise and create replacement wetlands.
FHWA has identified several additional initiatives as possibilities
for 2004 and beyond:
--Iowa--the State DOT's living roadside and prairie restoration
program;
--California--several land-use/transportation/conservation planning
initiatives;
--Alaska--highway culvert replacement program to improve fish
passage;
--Arizona--Desert bighorn habitat study and conservation plan
relative to the US 93 upgrade.
CONTEXT SENSITIVE SOLUTIONS
Question. In 2004, the budget proposes to establish a baseline of
best practices for integrated planning and encourage 11 States to adopt
context sensitive solutions (CSS). Have those 11 States been identified
and what will their participation require?
Answer. FHWA is advocating the advancement of context sensitive
solutions (CSS) and integrated approaches to the planning and
environmental process as part of its Environmental Vital Few Goal. As a
baseline for CSS, FHWA selected the five States (Connecticut, Kentucky,
Maryland, Minnesota, and Utah) that were selected in 1998 as Context
Sensitive Design (CSD)/CSS pilot States.
FHWA is currently finalizing the criteria that will be used to
identify additional States that have adopted CSS. The criteria under
consideration include the following:
--Some projects are being implemented using a CSS approach, tools,
and methodologies.
--Technical staff is trained in a CSS approach, both in field and
central offices, and across disciplines (planning, environment,
design, right-of-way, operations, and maintenance).
--Interdisciplinary teams are involved in the process from the
beginning to the end.
--There is early, continuing, and interactive public involvement
throughout the project development process.
--There is a written commitment or policy.
Following finalization of the criteria, FHWA anticipates
identifying a minimum of three additional CSS States by the close of
fiscal year 2003. The fiscal year 2004 target for CSS is to increase
the total number of CSS States to 11, although FHWA has not yet
identified the additional States that will allow the agency to reach
its fiscal year 2004 target.
STRATEGIC HIGHWAY NETWORK
Question. The budget requests $4.6 million to coordinate military
and civilian traffic needs in emergencies focusing on the Strategic
Highway Network. Please provide an accounting of exactly how FHWA plans
to spend this $4.6 million.
Answer. The $4.6 million requested is to support security
activities that are much broader than just the Strategic Highway
Network (STRAHNET). The STRAHNET system (a portion of the National
Highway System) supports military deployment and is in good structural
and operational condition.
DOT works with the Department of Defense (DOD) to improve
mobilization effectiveness, and to help State and local transportation
agencies safely and securely sustain vital traffic flows. Approximately
$2.3 million of the funds will be used to support and improve military
deployment including: (1) workshops with civilian and military
authorities at the major deployment ``forts''; (2) development and
distribution of a best practices guide for support of military
deployment; (3) specific reviews of one or more of the ``fort-to-port''
routes at the major military platforms; and (4) coordination with DOD
to facilitate rapid mobilization over the highway network and to
minimize disruption to traffic during the mobilization.
The remaining $2.3 million will be used for a broad array of
security initiatives, the more significant of which include: (1)
coordination with highway industry partners to implement the
Transportation Security Administration's (TSA) proposed security
standards regarding protection of critical infrastructure; (2)
transportation-focused emergency response preparedness activities for
natural disasters, accidental incidents involving hazardous materials,
and intentional acts in metropolitan areas designated by the Department
of Homeland Security (DHS) as being at greatest risk; and (3) internal
agency initiatives to ensure continuity of operations preparedness for
emergencies. The emergency response activities are fully coordinated
with DHS units including FEMA, TSA, etc., the National Academy of
Sciences, and the American Association of State Highway and
Transportation Officials (AASHTO).
MEGA PROJECTS OVERSIGHT
Question. The Department has identified and initiated steps to
improve oversight of mega projects by developing a comprehensive,
standard approach. What is the new comprehensive, standard approach
that will be applied to all mega projects? How is it different than
previous oversight requirements, and how does the Department envision
that this new approach will improve mega project planning and
construction?
Answer. Beginning in May 2000, FHWA issued its Financial Plan
Guidance defining the content and format of the Financial Plans as
required by Section 1305 of TEA-21, for all highway projects with an
estimated total cost of $1.0 billion or more. The Financial Plan
provides a comprehensive document reflecting the total cost of the
project, and provides reasonable assurances that there will be
sufficient financial resources to complete the project as planned. Cost
containment strategies are also identified in the Financial Plans, as
well as an implementation schedule for completing the project. Annual
updates are required to track significant cost and schedule deviations
from the initial Financial Plan, and mitigative actions taken to adjust
for those deviations. A provision in the SAFETEA reauthorization
proposal would make Financial Plans a requirement for all highway
projects receiving $100 million or more in Federal-aid funds.
As a standard operating procedure, major (mega) projects produce
periodic (usually monthly) cost, schedule, and status reports; and
periodic status meetings are held with the State Transportation
Agency's project management team, FHWA, and other involved agencies in
attendance. The periodic status meetings discuss project costs,
schedules, quality issues, and other status items in sufficient enough
detail to allow involved parties to be aware of significant issues and
actions planned to mitigate any adverse impacts.
FHWA is committed to assigning a designated Oversight Manager to
each active major project, dedicated full-time to that specific major
project. The Oversight Manager may draw upon resources from within his/
her Division Office, in order to form an integrated project team that
is responsible for providing proper Federal stewardship and oversight
of the major project. Core competencies and training resources have
been established for the major project Oversight Managers. A web-based
resource manual has also been completed in order to provide guidance,
tools, and best practices to assist the Oversight Managers in
effectively carrying out their duties.
An active major projects monthly status reporting system has been
implemented in conjunction with the Department's Office of Inspector
General (OIG). The assigned Oversight Managers are responsible for
updating the critical issues and risks (schedule, cost, funding, legal,
contractual, and technical) on a monthly basis, with the consolidated
report forwarded to FHWA upper management and the OIG.
The sharing of best practices and lessons learned among the major
projects are accomplished via annual Oversight Managers meetings, semi-
annual newsletters, and the Central Artery/Tunnel Project's Innovations
and Advancements workshop.
Project Management Plans are strongly encouraged from a best
practices point of view, in order to clearly define the roles,
responsibilities, processes, and activities that will result in the
major project being completed on-time, within budget, with the highest
degree of quality, in a safe manner, and in a manner in which the
public trust, support, and confidence is maintained. A provision in the
SAFETEA reauthorization proposal would make Project Management Plans a
requirement for all highway projects with an estimated total cost of
$1.0 billion or more.
All of these initiatives have been implemented within the last 3
years and have expanded the Federal stewardship and oversight of major
project planning and construction.
``AT-RISK'' MEGA PROJECTS
Question. The budget discusses plans to designate mega projects
with significant deviations from cost and schedule baselines as ``at-
risk.'' Does this designation carry with it any additional requirements
or Federal oversight? Please identify mega projects currently underway
that, under this new plan, would receive an ``at-risk'' designation?
Answer. Major (mega) projects designated ``at-risk'' would trigger
certain special conditions or restrictions, until the recipient of
Federal funds addresses identified issues in an approved recovery plan.
These special conditions may include withholding of authority to
proceed to the next phase of the project; requiring additional, more-
detailed cost, schedule, or financial reports; requiring the recipient
to obtain technical or management assistance; establishing additional
prior approvals; requiring more direct on-site inspection of the
project by Department personnel; and/or follow-up reporting on a
periodic basis until the Department removes the designation.
The Boston Central Artery/Tunnel project was designated ``at-risk''
in 2000 after several investigations and project reviews indicated
significant rising costs. The I-95/I-495 Springfield Interchange
project, though not officially designated ``at-risk,'' was required to
begin submitting Financial Plans due to rising costs, even though the
total cost of the project is still well under $1.0 billion. None of the
other 12 identified active major projects have thus far experienced
significant cost or schedule deviations.
SR 210/FOOTHILL FREEWAY ADDITIONAL FTE
Question. The FHWA budget lists the FTE requirements for mega
project oversight; however, the SR 210/Foothill Freeway, CA project has
no staff listed for fiscal year 2004. Given that all mega projects will
receive improved oversight, why then are no FTE requested for this
particular project?
Answer. The SR 210/Foothill Freeway project is on schedule and
within budget; therefore, no Financial Plans and annual updates, and
hence additional FTEs to provide project oversight, are required for
this project. With a substantial portion of the project already
completed, the California Division office is able to conduct adequate
oversight of this major project with existing staff.
ENVIROMENTAL STREAMLINING
Question. The budget requests $20.8 million to support
transportation research dealing with environmental streamlining which
focuses on long-term and preemptive measures designed to streamline the
environmental impact review process and procedures. What environmental
streamlining measures have been implemented thus far and what measures
are being researched that would lead to greater environmental
streamlining efforts in the future? Please provide a detailed breakdown
of how the requested $20.8 million will be spent.
Answer. FHWA has been pursuing environmental streamlining measures
on multiple fronts, some national in scope, some regional or State-
specific in scope. These measures implement Congressional direction
from Section 1309 of TEA-21, and have been implemented in the context
of Executive Order 13274 and FHWA's Vital Few performance planning
effort. The following describes some of FHWA's accomplishments to-date.
Solidifying Interagency Partnerships
Field level environmental summits.--The FHWA Eastern, Southern, and
Western Resource Centers held regional conferences, bringing together
representatives from Federal, State, and local transportation,
planning, and resource agencies, local governments, Metropolitan
Planning Organizations (MPOs), transportation and environmental
organizations, tribes, and consultants to discuss relevant issues and
identify opportunities for improvement. Results of the summits were
distributed via the Successes in Streamlining Monthly Newsletter
(September 2002). The sharing of solutions and integration of efforts
found within each regional conference advances streamlining through an
emphasis on process improvements.
Interagency training on environmental streamlining.--The Federal
interagency workgroup has collaborated in organizing a series of
environmental streamlining workshops aimed at getting field staff of
each Federal agency aligned with the national agenda. FHWA sponsored a
multi-agency workshop in 1999 and agency-specific workshops with the
U.S. Army Corps of Engineers (2001), Environmental Protection Agency
(2002) and Fish and Wildlife Services/National Oceanic and Atmospheric
Administration (2003). These workshops have been a good forum for
sharing the national vision, identifying issues that cause interagency
conflict, and sharing innovative practices from around the country.
Furthermore, they have promoted the concepts of coordination and
process efficiencies in the environmental review of transportation
projects.
Institutionalizing Dispute Resolution
Partnership with Institute for Environmental Conflict Resolution
(IECR).--The 1998 Environmental Policy and Conflict Resolution Act
created IECR, which is part of the Morris K. Udall Foundation. IECR
helps Federal agencies and other involved parties manage and resolve
Federal environmental, natural resource, and public lands disputes by
providing services such as case consultation, conflict assessment,
process design, facilitation, and mediation. FHWA partnered with IECR
to meet the mandate set forth in Section 1309(c) of TEA-21 to create
dispute resolution procedures as part of a national environmental
streamlining initiative. FHWA and IECR have been working effectively
together since 1999 to develop and implement the four components of the
dispute resolution system, described below. The dispute resolution
system is intended to assist the agencies to quickly and effectively
focus on the pertinent project issues, save time, and avoid the costs
of potential litigation.
Roster of qualified neutral facilitators.--As part of the FHWA/IECR
collaborative partnership, a transportation roster was created that is
comprised of dispute resolution professionals with experience in NEPA
and transportation projects. The roster is managed by the U.S.
Institute for Environmental Conflict Resolution, with financial support
by FHWA to help cover administrative costs. These professionals can
provide services such as conflict assessment, facilitation of
interagency partnering agreements, design of conflict management
processes, and mediation of disputes. Project sponsors contact IECR to
access the transportation roster, and then negotiate contracts and pay
for the costs of the transportation roster members' services directly.
Recently, FHWA and transportation sponsors have used the transportation
roster to provide facilitators for three of the priority projects
designated under Executive Order 13274.
Guidance on interagency conflict management.--This FHWA guidance
offers a range of optional tools agencies can use to manage conflicts
and resolve disputes during the transportation project development and
environmental review processes. It also constitutes the key reference
document used in the interagency workshops described below.
Interagency conflict management workshops.--The FHWA dispute
resolution system includes a series of customized facilitated
interagency workshops in each of the 10 standard Federal regions. The
workshops were developed during 2002 and will be held from May to
December 2003. Skills gained at the workshops will help practitioners
from the various agencies to better identify environmental review
issues, negotiate time frames and work through disagreements using
interest based negotiating.
Supporting State Environmental Streamlining Efforts
American Association of State Highway and Transportation Officials
(AASHTO) ``Center for Environmental Excellence.''--AASHTO launched the
Center in 2002 with technical and financial assistance provided by
FHWA. The Center's mission is to assist AASHTO's member organizations
with implementing environmental stewardship into their various
practices and procedures, and promoting innovative streamlining of the
project delivery process. AASHTO expects that the results of this
assistance will be beneficial to State transportation agencies and also
supportive of FHWA's work in protecting and enhancing the environment.
Individual State environmental streamlining initiatives.--FHWA has
partnered with well over half of the State departments of
transportation in advancing their own environmental streamlining
efforts. Notable examples include Florida's Efficient Transportation
Decisionmaking effort, and Texas' I-69 interagency partnering effort.
Environmental Streamlining Research.--The funds requested in fiscal
year 2004 to support transportation research dealing with environmental
streamlining (ES) will be used for the following activities:
Assistance to State and Field Office Initiatives
--Support for State DOT ES efforts
--AASHTO Center for Environmental Excellence
--FHWA field office initiatives to enhance interagency coordination
National ES Initiatives
--Dispute resolution facilitation and training
--Performance evaluation systems and studies
--Integrated approaches promotion & training
--Information sharing on ES
--Policy Research.
FTE DISTRIBUTION
Question. The FHWA budget requests 12 new FTE. Specifically where
will these new FTE be utilized?
Answer. The 12 new FTE that are requested in fiscal year 2004 will
be utilized as Mega-Project Oversight Managers to enhance major
projects oversight and fulfill FHWA's commitment of having a dedicated
oversight project manager on each mega-project. They will: represent
FHWA before other Federal agencies, State Transportation Agencies
(STA), local agencies, consultants, and contractors on all project
delivery and oversight issues; be responsible for overseeing the review
and approval of plans, specifications and cost estimates; and ensure
that FHWA laws and requirements, such as Buy America, Davis-Bacon
minimum wage rates, Disadvantaged Business Enterprise and affirmative
action requirements, records of materials and supplies, etc., are
incorporated in Federal-aid construction contracts. The table below
provides a breakdown of the FTE Requirement for Active (and Future)
Major Projects.
FISCAL YEAR 2004 FTE REQUIREMENT FOR ACTIVE (AND FUTURE) MAJOR PROJECTS
----------------------------------------------------------------------------------------------------------------
Current Fiscal Year
Projects Status Staffing Level 2004
----------------------------------------------------------------------------------------------------------------
I-80/San Francisco-Oakland Bay Bridge (East Active......................... 1 1
Span), CA.
SR 210/Foothill Freeway........................ Active......................... .............. ..............
I-25/I-225 Southeast Corridor, CO.............. Active......................... 1 1
New Haven Harbor Crossing, CT.................. Active......................... .............. 1
Miami Intermodal Center, FL.................... Active......................... .............. 1
I-4/I-275 Tampa Interstate, FL................. Active......................... .............. 1
New Mississippi River Bridge, IL-MO............ Active......................... .............. 1
Central Artery/Ted Williams Tunnel, MA......... Active......................... 5 3
Central Texas Turnpike, TX..................... Active......................... 1 1
I-10/Katy Freeway, TX.......................... Active......................... .............. 1
I-95/Woodrow Wilson Bridge, MD................. Active......................... 2 2
I-95/I-495 Springfield Interchange, VA......... Active......................... 1 1
I-64/Hampton Roads Third Crossing, VA.......... Active......................... .............. 2
I-94/East-West Corridor, WI.................... Active......................... .............. 1
New Ohio River Bridges, KY-IN.................. Future......................... .............. 1
I-94/Edsel Ford Freeway, MI.................... Future......................... .............. 1
Mon/Fayette Expressway, PA..................... Future......................... .............. 1
I-635/LBJ Freeway (West Section), TX........... Future......................... .............. 1
I-405 Corridor/SR 509 and I-5/SR520/Alaskan Way Future......................... .............. 2
Viaduct, WA.
----------------------------------------------------------------
Totals................................... ............................... 11 23
----------------------------------------------------------------------------------------------------------------
UPGRADING AND PROTECTING THE EXISTING INFORMATION RESOURCE MANAGEMENT
INFRASTRUCTURE
Question. As part of the LAE, Federal Highways anticipated
upgrading and protecting the existing Information Resource Management
infrastructure. What does this anticipated upgrade involve and how much
money will be required to specifically carry out this effort?
Answer. The anticipated upgrade includes: (1) establishment of a
systematic replacement/refresh cycle for basic Information Resource
Management (IRM) hardware; (2) additional contract services for IRM
Security; and (3) upgrades and maintenance of IRM Security equipment.
The total amount of money required to carry out this consolidated
effort is $2.9 million.
The first effort is establishment of a systematic replacement/
refresh cycle for basic IRM equipment, in particular, desktop
computers, laptop computers, printers and networks. The Federal Highway
Administration (FHWA) is not seeking to upgrade these categories of IRM
hardware across the board. Rather, FHWA seeks to establish a standard
replacement interval for each category of IRM hardware and then to
replace hardware items only when their interval has elapsed. FHWA
requests $1.2 million to carry out this effort.
The second effort is an increase in contract services for IRM
Security. The additional contract services would be used to enable FHWA
to complete certification and accreditation activities by the
Department of Transportation's established deadline of December 2005 as
well as to develop and implement the initial components of a continuous
risk management process. FHWA requests $1.2 million to carry out this
effort.
The third effort is to upgrade and maintain IRM Security equipment.
In particular, the effort would involve purchasing the automated tools,
software upgrades and associated maintenance necessary to actively look
for, anticipate, and counteract threats and vulnerabilities before they
are employed or exploited. These tools include, without limitation,
intrusion detection systems, vulnerability scanners, incident response
tools, incident tracking systems, anti-virus, file encryption, and
secure remote access. FHWA requests $500,000 to carry out this effort.
______
Question Submitted by Senator Arlen Specter
COMMERCIAL PASSENGER AIRCRAFT FUEL TANK SAFETY
Question. Mr. Secretary, I am advised that the Federal Aviation
Administration has worked recently with Foamex International, Inc. of
Linwood, Pennsylvania on identifying current fiscal year funding
opportunities for important research concerning the safety of
commercial passenger aircraft fuel tanks.
I was pleased to learn that Associate Administrator Charles Keegan
and his staff are drafting a Cooperative Research Development Agreement
to conduct tests that will help determine the effectiveness of using
the company's Safety Foam for safety and security applications. Safety
Foam is an advanced reticulated polyurethane foam material, which can
be installed inside aircraft fuel tanks and can act as a 3-dimensional
fire screen that prevents fire propagation due to internal ignition of
fuel vapors.
Given the importance of maximizing the safety of such fuel tanks, I
would appreciate your providing the Subcommittee with an update as to
the timetable for entering into the Cooperative Agreement with Foamex
International, the amount of fiscal year 2003 funds the agency is
prepared to devote to this critical research, and any other relevant
information on this specific subject you would like to share with us.
Answer. Working with Foamex International, the FAA has developed a
Cooperative Research Development Agreement. The agreement was sent to
Foamex for their signature on June 13, 2003.
The FAA has set aside $100,000 in fiscal year 2003 aircraft safety
funds to support tests and evaluations to determine the potential
effectiveness of the foam for commercial aviation applications.
At a June 10, 2003, meeting of fuel system and foam experts,
including representatives from Foamex and others in the private sector,
the FAA developed the preliminary proposal for a series of tests to
explore the foam's feasibility in mitigating the effects of a simulated
crash of an airplane and the spillage of a large amount of fuel. Foamex
and FAA technical personnel have met to discuss and design a test
plant. The parts necessary for the test have been ordered. Since they
are rather unique and need to be specially fitted, the first ``water
only'' test won't take place until mid-October.
______
Questions Submitted by Senator Sam Brownback
SHORT LINE RAILROADS
Question. As I mentioned in my opening remarks, a particular
concern that should be near the heart of many of us in this room is the
fate of short line local freight railroads. These short lines account
for roughly half the rail miles in Kansas. These lines gather tens of
thousands of carloads of grain and start them on their way across the
country and for export abroad.
However, government disincentives forced the prior owners of these
light density lines to neglect investment in the infrastructure, and
now the weight of loaded railroad cars are growing ever heavier. This
has forced many of these light density lines to abandon operations.
From 1980 to 1990 Kansas lost 862 miles of railroad to abandonment.
From 1990 to 2000, Kansas lost 1,157 miles. In the last 2 years we have
lost 357 miles.
In Kansas, when railroads go out of business it is very bad for
highways. For example, Harper County, Kansas recently lost rail service
and the increase in heavy trucks as a result does so much damage to the
roads that the government can no longer afford to pave them--instead
the once paved roads are being turned into unpaved gravel roads.
The Kansas DOT estimates that short line railroads, by removing
heavy trucks from the highway, save roughly 17 cents in highway damage
for every mile that a truck would otherwise travel. Seventeen cents a
mile in Kansas amounts to $50,000,000 per year that K-DOT estimates are
saved by the continued existence of these lines.
It seems to me Mr. Secretary that these numbers in terms of cost
savings for our highway system are compelling. The more traffic we can
get onto local railroads the less it costs to maintain our highways,
not to mention the immeasurable cost in jobs and opportunities to
communities that lose rail service.
Last Congress I supported legislation S. 1220 along with my
colleagues Sen. Specter and Sen. Hollings that would have made $350
million per year available to help preserve freight service on these
lines. What similar plans, if any, does the administration have to
address the desperate need in every rail served State to preserve short
line railroads?
Answer. The Administration has not proposed a new grant program as
contained in S. 1220. There exists now a loan and loan guarantee
program, the Railroad Rehabilitation and Improvement Financing (RRIF)
Program, that offers financial assistance to meet these needs.
S. 788 CENTURY OF FLIGHT ACT
Question. While the aviation industry is currently suffering and
revenue for the Airport and Airway Trust Fund has decreased recently,
the FAA forecasts that growth in the airline industry is expected to
return to near normal levels. If these forecasts are true, demand for
air travel will require expansion of air traffic services. In an
industry that is currently suffering, we must act now to provide the
needed assistance and vision where we are currently lacking.
This is precisely why I introduced along with Senator Hollings, S.
788, the Second Century of Flight Act. The purpose of this bill is to
ensure that the United States continues to lead the world in
aeronautics and aviation safety, technology, and efficiency.
Additionally, this bill aims to create a better trained U.S. aerospace
workforce, through support for technical colleges and other educational
institutions. And of particular importance, this bill would facilitate
the coordination of U.S. research efforts, and increase focus on
directing government research towards usable products that enhance
safety, are environmentally sound, and increase efficiency.
I am pleased that my Colleagues on the Commerce Committee agreed to
three of the four titles of S. 788, in the FAA Reauthorization bill we
passed out of the Committee. These titles include provisions that
create a national office to coordinate aviation and aerospace research
activities with the U.S. Government and encourages public-private
cooperation; create a national office to focus on a next generation air
traffic management system; and establishes educational incentives to
train the next generation of aeronautics engineers and mechanics.
Mr. Secretary, I am sure you are aware of the importance of these
issues, not only in Kansas, but across the United States. I would like
you to comment on your commitment to these issues and specifically,
your support of the initiatives in S. 788.
Answer. The Department of Transportation (DOT) is very aware of the
importance of the issues you raise and have actively initiated efforts
to better support the U.S. position in aerospace research and
development. DOT has formed a Joint Planning Office (JPO) comprised of
the Federal Aviation Administration (FAA), Department of Defense,
Transportation Security Administration, Department of Commerce, and
National Aeronautics and Space Administration to focus on development
of our next generation air traffic management system. The FAA leads the
team. We are also establishing a high-level policy committee to guide
this effort that will be chaired by the Secretary of Transportation.
The Secretary will establish the Policy Committee in the summer of
2003. The next steps are to establish advisory committees for this
activity, to coordinate a framework for the initiative through the five
participating agencies and departments, and begin drafting the national
plan.
______
Questions Submitted by Senator Robert C. Byrd
COMPETITIVE SOURCING
Question. Last year, the Federal Aviation Administration announced
that it is considering plans to privatize up to 2,700 air traffic
control jobs at 58 of FAA's 61 Automated Flight Service Stations (AFSS)
around the country. These jobs are critical to the safety of the
traveling public, and I believe that the Department of Transportation
should be more careful about handing these important functions over to
the private sector. This country learned a valuable lesson about
entrusting public safety responsibilities to private companies when we
discovered security failures at our airports, which required Congress
to place those responsibilities in the hands of the Transportation
Security Administration. Apparently, the Department has not learned
anything from this experience.
I am concerned that the FAA is acting under pressure from the White
House to implement the President's competitive sourcing initiative. OMB
scores agencies on how well they comply with the President's Management
Agenda. Agencies are encouraged to submit management plans to the OMB,
which incorporate the competitive sourcing quotas outlined in the
President's budget.
It is my understanding that these competitive sourcing plans, once
they are submitted to the OMB for approval, can be released to the
public at the discretion of the agency heads. If the Congress is to
appropriate substantial funding for private sector employment
opportunities, I expect that you will first provide Congress, and in
particular this Committee, with a copy of any management plans or
competitive sourcing proposal that the Department of Transportation
submits to the OMB. When do you expect to submit a competitive sourcing
plan to OMB, and how soon can you make that plan available to this
Committee?
Answer. FAA prepared a competitive sourcing plan for Automated
Flight Service Stations that was submitted to the Department of
Transportation on June 19, 2002. As a result of recent changes to OMB
Circular A-76 and the President's Management Agenda, FAA is in the
process of updating the plan again. The agency will provide the
Committee a copy of the revised FAA competitive sourcing plan when it
is complete.
Question. How can you explain to the American people the
willingness of the FAA to take flight safety out of the hands of
dedicated public servants and put hand it over to private companies
that are only dedicated to maximizing profits?
Answer. Automated Flight Service Stations (AFSS) do not engage in
the separation of aircraft. Their duties primarily support the general
aviation community by providing weather briefings, processing flight
plans, assisting lost pilots, and initiating search and rescue
operations. These functions are performed at separate facilities
throughout the United States and Puerto Rico. (The three AFSS in Alaska
have been excluded from the study.) Each year the FAA spends over $500
million to support this function. Since the competitive sourcing study
of the AFSS is a public/private competition, not a privatization, the
existing government employees will have a chance to compete for and win
their work. So it will not automatically go to the private sector.
Whoever wins the competition, public or private, will be accountable
for their performance through performance metrics and incentives. FAA
believes that it is possible to pursue ways of decreasing costs while
improving service through the use of OMB Circular A-76.
______
Questions Submitted by Senator Richard J. Durbin
FISCAL YEAR 2004 FUNDING REQUEST FOR AMTRAK
Question. Why did the Administration only include $900 million for
Amtrak in the fiscal year 2004 budget when this level of funding will
send the company into insolvency?
Answer. The fiscal year 2004 request was a request with a message.
That message is that the Administration is unwilling to support ever-
increasing levels of appropriations for the current, broken business
model of providing intercity passenger rail service in this country.
Until the changes to intercity passenger rail service are developed and
agreed upon as part of the authorization process, the Administration is
not willing to discuss funding intercity passenger rail service at a
level above $900 million.
THE ADMINISTRATION'S VISION FOR INTERCITY PASSENGER RAIL
Question. The Bush Administration's vision for our Nation's
intercity passenger rail system would separate the train operations
from the infrastructure management on the northeast corridor. The
United Kingdom failed when it tried this model. Can you give me
specifics as to how your model for the northeast corridor differs from
the failed British model?
Answer. The Administration has carefully observed the rail
privatization initiative in the United Kingdom and believes that the
strategy for intercity passenger rail reform in this country will
reflect the lessons that can be learned from the United Kingdom's
experience. The primary lesson is that the Administration's plan will
avoid the conflict between infrastructure owner and train operator
inherent in the U.K. model. The public will continue to own the
infrastructure with a strong say in how it is maintained and operated.
The same public entity, a compact of the Northeast Corridor States,
will also determine who operates over this infrastructure.
Question. In your vision for Amtrak's reauthorization, you call for
private operators to run Amtrak's long distance routes. Can you name
for me a company that is willing to operate one of these routes without
subsidy? Do you think the freights will agree to allow multiple private
operators to run passenger trains on their tracks?
Answer. The Department's proposal does not envision private sector
companies volunteering to operate intercity trains at a loss. The
States would put together the financial package for each train they
believe is important enough to warrant the State's support. To the
extent such a train would not cover its operating expenses from the
fare box, then it would be up to the States to identify the source or
sources of operating assistance. With further regard to private
operators, the Department does not envision multiple operators on the
same rail route except in very close proximity to stations and
terminals where routes come together.
Question. Do you think the States have the money to pay for the
operating costs to run the long distance trains as the Administration
is suggesting in its plan? Considering that the Federal Government
created the long distance routes and that these routes run through
multiple States, why should these costs be shifted to the States? The
Federal Government created the Federal highway system which runs
through multiple States, yet you are not asking for the States to cover
the operating costs for those highways.
Answer. The Administration is well aware of the financial
challenges facing the States. For that reason, the Administration's
proposal envisions a reasonable transition time to permit the States to
identify which services are important to them and sources of funds to
provide needed financial assistance. The expectation that the Federal
Government does not provide operating assistance is consistent with the
Federal role in highways and transit; States and localities assume
responsibility for operating costs for these forms of transportation.
SMALL COMMUNITY AIR SERVICE
Question. Is the Department working with small communities to help
attract and retain passenger air service? In what ways? This becomes
more urgent as carriers terminate service to smaller communities due to
the financial crisis in the airline/aviation industry.
Answer. The Department recognizes that small communities have been
affected by the financial crisis in the airline industry. The
Department has two programs specifically designed to help small
communities with their air services. First, under the Essential Air
Service (EAS) program, over 700 communities are guaranteed to receive
at least a minimum level of air service. Of those, the Department
currently subsidizes carriers to serve 135 communities nationwide, 33
of which are in Alaska. Since September 11, 2001, the Department has
received over 50 notices from carriers to terminate the last service at
the community, most of them triggering a first-time EAS subsidy. The
Department has ensured that these communities continue to receive air
service as we seek replacement carriers.
Second, the Department administers the Small Community Air Service
Development Pilot Program. This program was established under the AIR-
21 legislation and is a new program designed to help small communities
address problems related to inadequate air service and high airfares.
Under the legislation, the Department may make grant awards to a
maximum of 40 communities each year, although no more than 4 may be
from any one State. This program is unique in that it provides
communities the flexibility to design their own solutions to their air
service problems and to seek Federal financial support to help them
implement their plans.
For fiscal year 2002, the first year that funds were available,
Congress appropriated $20 million for this program. The program was
very popular in fiscal year 2002 with the Department receiving 180
applications. Grant awards were made to 40 communities using all of the
funds available. Many of these grants have already led to new or
improved services at the selected communities, including Fort Smith,
Arkansas; Daytona Beach, Florida; Augusta, Georgia; Hailey, Idaho; Lake
Charles, Louisiana; Meridian, Mississippi; Taos, New Mexico; Akron/
Canton, Ohio; Rapid City, South Dakota; Charleston, West Virginia; and
Rhinelander, Wisconsin. In February 2003, Congress appropriated $20
million for this program for fiscal year 2003. The Department solicited
proposals from interested communities on April 29. Proposals were due
June 30 and are being reviewed.
OVERSEAS REPAIR FACILITIES
Question. The Administrator has been petitioned by the
Transportation Trades Department of the AFL-CIO and its member unions
for an immediate suspension of repairs performed on U.S. aircraft at
overseas maintenance facilities. The petition cites potential threats
to safety and security as well as lax government oversight. Do you have
plans to either suspend these repairs or more fully study this issue in
the near future? Would you support Federal legislation?
Answer. The Federal Aviation Administration (FAA) agrees that our
national security posture was dramatically altered from the tragic
events of September 11, 2001. All transportation agencies collectively
identified ways to improve their security plans and immediately set
about incorporating changes necessary to strengthen those deficient
areas. The Transportation Security Administration (TSA) is beginning to
study security requirements for both foreign and domestic repair
stations. The FAA will support and work with the Homeland Security
Department's TSA in this area.
There are no plans to revoke any foreign repair station
certificates. The AFL-CIO requested that FAA revoke foreign repair
station certificates. This would greatly reduce the availability of
certified repair stations and severely affect the aviation industry.
Under the proposed AFL-CIO scenario the only option for air carriers,
both foreign and domestic, operating U.S. registered aircraft would be
to have maintenance performed in the United States by domestic repair
stations. This would set up a chain of events that would create
scheduling difficulties and reduce the number of revenue-producing
flights.
The FAA would not support additional Federal legislation in these
areas. The FAA currently has the authority to perform surveillance,
oversight, and enforcements as appropriate on foreign repair stations.
SUBCOMMITTEE RECESS
Senator Shelby. We wish you the best of health and we will
recess the subcommittee to the call of the Chair.
Secretary Mineta. Thank you very much, Mr. Chairman.
Senator Shelby. Thank you.
[Whereupon, at 11:37 a.m., Thursday, May 8, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
----------
TUESDAY, MAY 20, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:11 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Richard C. Shelby (chairman)
presiding.
Present: Senators Shelby, Specter, Murray, and Byrd.
DEPARTMENT OF THE TREASURY
Office of the Secretary
STATEMENT OF HON. JOHN SNOW, SECRETARY
ACCOMPANIED BY TERESA MULLET RESSEL, ACTING ASSISTANT SECRETARY,
MANAGEMENT AND BUDGET
OPENING STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. Good morning. The committee will come to
order.
I would like to welcome John Snow, Secretary of the
Department of the Treasury. Thank you, Mr. Secretary, for
appearing before the subcommittee today to discuss the fiscal
year 2004 budget request for the Department of the Treasury. I
look forward to learning about the new leadership you bring to
the Department as well as the resources necessary to carry out
the responsibilities at the Department.
The Department of the Treasury has undergone significant
changes since the transfer of the majority of its law
enforcement bureaus and related functions to the newly created
Department of Homeland Security and the Department of Justice.
In the midst of those changes, the Department still maintains
the key role in Government as economic policymaker, financial
manager, and revenue collector. That is no small task,
especially now as the country seeks economic recovery, job
creation, and comprehensive tax reform and relief.
The Department has also created a new Bureau, the Alcohol
and Tobacco Tax and Trade Bureau, and also anticipates
consolidating the Office of Inspector General and the Inspector
General for Tax Administration. I am interested in learning,
Mr. Secretary, more about those plans.
As the threat of terrorism continues, finding ways to
combat money laundering and other terrorist financing tools is
an important role for the Department. It is vital to our
ongoing counterterrorism efforts that we know what resources
the Department will need to combat such nefarious activities.
Treasury's budget request for fiscal year 2004 is $11.408
billion, which includes $21.9 million for the activities of the
Office of Foreign Asset Control, $57.5 million for the
Financial Crimes Enforcement Network, and $5.3 million to
increase the counterterrorism activities of the Internal
Revenue Service's (IRS) Criminal Investigations Unit.
These three bureaus within Treasury form part of the
backbone of our ongoing fight against terrorist financing.
Recent attacks in Saudi Arabia, Morocco, and Israel have shown
it is important that we maintain a coordinated focus and
provide the necessary resources to ensure that our combined
efforts to disrupt terrorism financing are persistent and
effective.
Turning an eye toward the more traditional functions of
Government, I want to briefly touch on the $10.4 billion
request for the IRS that was discussed at length at a prior
subcommittee hearing. The IRS' ongoing business system
modernization efforts will require $429 million in the year
2004. The subcommittee appreciates the efforts that continue to
go into this massive upgrade that we hope will improve the
speed, timeliness, and accuracy of IRS administration of the
tax system.
I am aware, Mr. Secretary, that last year's efforts
encountered a hiccup of sorts. However, I am interested in
hearing how the Department is working with the IRS to get back
on track and ensure that schedule and cost setbacks do not
become common occurrences.
While the IRS' traditional role is to implement and enforce
our tax laws, it has also been charged with administering the
Earned Income Tax Credit. The budget proposes a number of
changes to that program because of the high level of fraud
associated with the program's administration. Each year, the
IRS makes approximately--Mr. Secretary, listen to this number.
Each year, the IRS makes approximately $9 billion in erroneous
Earned Income Tax Credit payments--$9 billion. This is a direct
and permanent loss to American taxpayers because it is
virtually impossible to recapture these payments once they have
been made.
To implement the EITC Task Force recommendations, the
Department is requesting $100 million to address the problems
associated with the current program administration that results
in overpayments. Eliminating erroneous payments and ensuring
the proper administration of this program are certainly goals
with which I completely agree.
In conclusion, Mr. Secretary, I believe this is a
straightforward budget that includes a number of important
reforms and efforts at modernization. I appreciate that it will
take time for the Department to adjust to the realignment of
offices to the Department of Homeland Security and the
Department of Justice. Mr. Secretary, I am confident that you
have the opportunity to emerge stronger and more focused than
ever.
I want to thank you for being here today, and I look
forward to your testimony and the question period.
Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Thank you, Mr. Chairman.
I want to welcome Secretary Snow back to the subcommittee.
Over the years, he has testified both in public and private
capacities on a variety of transportation issues, and I have to
say I am tempted to ask him about how we can enhance Amtrak's
profitability or how we can improve management of our air
traffic control but, rather, I will focus on Treasury issues
this morning: the Earned Income Tax Credit, foreign sales
corporations, and the Administration's plans in Iraq.
Let me start with EITC because I am concerned about the
President's plan to spend $100 million to target low-income
families and possibly deny them this critical tax credit.
The EITC is designed to help the working poor. It is
probably the most targeted means-tested tax benefit in the
entire Federal code. It was started by President Ford, and it
was greatly expanded under President Reagan. While many working
families are eligible to receive it, as many as 25 percent or
more of those eligible families do not even apply for it. We
should be taking steps to allow more eligible families to get
the help they need, but I think the President's proposal goes
the other way. It has the potential to throw many honest
eligible families off the rolls by putting a complex paperwork
burden on families who are already struggling. It could also
have a chilling effect on many families who may be intimidated
upon receiving an official notice from the IRS questioning
their eligibility.
We are told the goal is to minimize fraud, and I think we
all agree that is an important and appropriate goal. Tax fraud
by any taxpayer should never be tolerated. It is a disservice
to every other family that works hard and plays by the rules.
But I think there are many unanswered questions about whether
the President's plan would meet that goal or whether it will
end up purging many families who need it from the program.
I have asked questions about this on a number of occasions,
and I haven't gotten clear answers, and so I hope Secretary
Snow is prepared to answer questions in detail today.
On the most basic level, I would like to know if targeting
the working poor is the most effective use of $100 million or
if there are other places where we can get more bang for the
buck in reducing tax fraud. It is estimated that hundreds of
billions of dollars in tax revenue never come in every year
because of tax cheats and people who underreport their true
income. Will the Treasury reap the greatest benefits by
clamping down on the working poor or on multimillionaires and
their tax attorneys who use questionable means to dodge taxes?
This subcommittee and our companion subcommittee in the
House have not gotten straight answers. The IRS claims this is
a balanced effort, balanced between fighting fraud and boosting
participation for eligible families. That sounds good. However,
the vast majority of the $100 million goes to increased
enforcement, while only $13 million goes to increased outreach.
That doesn't sound very balanced to me.
I would also like to know if the Treasury Department
through the IRS will have a formal public comment period before
it publishes the pre-certification rules. Will the
Administration evaluate the impact of its pilot project on
working poor families before it expands this initiative to 2
million families nationwide? We have been told that the
Administration plans to require the study, but we don't know if
the Administration and the subcommittee will have the results
in hand before the initiative is launched. I hope Secretary
Snow will be able to answer those questions this morning.
Another issue that concerns me is the Administration's
support for repealing the Extraterritorial Income (ETI)
Exclusion Act of 2000 in response to a World Trade Organization
dispute with the European Union. ETI, previously known as
Foreign Sales Corporation, provides a tax break to U.S.
exporters who employ American workers. ETI creates and sustains
jobs for American workers. According to a recent study,
exporters that benefit from the ETI may employ as many as 3.5
million American workers, including more than 100,000 in
Washington State.
I am very concerned that the Administration has thrown up a
white flag on this issue. The Administration's actions could
give the Europeans a green light to threaten $4 billion in
retaliatory tariffs against American agricultural and
manufacturing exports. If we proceed with the Administration's
white-flag approach, we will give Europe a tremendous
competitive advantage and will hurt American workers.
I have written to the U.S. Trade Representative about this,
but I still have not received a response, and I hope the
Secretary will have more to say about this important economic
policy and tax issue.
Finally, I will ask several questions about U.S. efforts in
Iraq. I am anxious to hear from the Secretary regarding
international participation in the effort to rebuild Iraq. We
have all seen the news reports that the effort to rebuild Iraq
could cost up to $600 billion over the next decade. The
Administration's budget request is silent on these costs, and
we have been told there will not be another supplemental
funding request this year. I hope the Secretary can give the
subcommittee and the full Appropriations Committee greater
information about this issue.
I am curious about the Administration's latest thinking on
international participation in the effort to rebuild Iraq. In
particular, what role does the Administration see for the
United Nations and countries that did not join the coalition
forces in Iraq? Several Administration officials have given the
Appropriations Committee very general responses to that
question. I hope the Secretary will be more forthcoming with
this subcommittee on the Administration's current position.
Finally, I will have questions for the Secretary regarding
the Administration's views on contracts negotiated by Saddam
Hussein's regime. I understand there are numerous high-profile
examples of Saddam's business dealings, some of which were
agreed to with the specific objective of undermining
international economic sanctions placed on the regime. I
believe these contracts should be set aside. The new Iraqi
Government should not be burdened with Saddam's business
dealings. I hope the Administration agrees with me on this
issue, and I hope we can work together to ensure that no U.S.
taxpayer assistance is ever used to reward Saddam's business
partners, those who actively worked to undermine economic
sanctions on Saddam Hussein.
So, Mr. Secretary, again, I welcome you here today and I
look forward to your testimony and a good dialogue this morning
as we move forward to craft our bill for the coming fiscal
year.
Thank you, Mr. Chairman.
Senator Shelby. Senator Byrd.
Senator Byrd. Mr. Chairman, I thank you and I thank the
ranking member for your comments. I will save my time for
questions.
Thank you.
Senator Shelby. Mr. Secretary, we welcome you to the
committee. Your written statement will be made part of the
record in its entirety. You may proceed as you wish.
STATEMENT OF SECRETARY JOHN SNOW
Secretary Snow. Thank you very much, Mr. Chairman, Senator
Murray, Senator Byrd. It is a great pleasure to be here today
and to have this opportunity, with Acting Assistant Secretary
Teresa Ressel, to be with you to discuss the Treasury
Department's fiscal year 2004 budget request. I will make a
brief oral statement and ask, Mr. Chairman, that my full formal
statement be included in the record.
You hit on the fundamental issue we face in a management
sense in your good opening comments, because it is clear that
with the creation of the Department of Homeland Security, the
Treasury Department has undergone the most significant
transformation in its long history. And the recent divestiture
of most of the Treasury's law enforcement bureaus has created
an opportunity--I think a very important opportunity and one we
want to make the most of--to refocus on our core mission. This
core mission would in my view encompass the following things:
First, creating jobs for economic growth, security,
promoting economic security, jobs, and growth. That broad
category of things is something that the Treasury Department I
think has to be terribly focused on.
Another broad category of things that the Department needs
to be focused on is ensuring that the tax system is effectively
administered and is fair for all taxpayers.
And, finally, the Treasury Department has a critically
important mission in focusing on fighting the financial war
against terrorism.
The budget proposal which we have submitted for fiscal year
2004 totals $11.408 billion. We have provided the committee
with a detailed breakdown and justification for this request. I
would like to take the opportunity here this morning to
highlight three areas of particular importance.
First, going to the primary mission, developing and
implementing policies to provide economic security, jobs, and
growth for the American people. Of course, this mission is
embodied in, among other things, the President's plan for Jobs
and Growth, which is pending before both bodies of the
Congress. The goals of the Jobs and Growth plan are to
stimulate consumer spending, promote investment by individuals
and businesses that will lead to economic growth and job
creation, and deliver critical assistance to unemployed
citizens. The fact is we are in a recovery, but it is too slow.
As a result, too many Americans don't have work.
Second, Treasury is working to ensure that the U.S. tax
system is fair for all Americans. That is a critically
important part of what Treasury is all about. A cornerstone of
Treasury's mission is helping citizens meet their tax
responsibilities while maintaining the fairness of the system
and respecting individual taxpayer rights, a matter that was
touched on in the opening statements as well.
Of course, this mission is mainly the responsibility of the
Internal Revenue Service (IRS), the biggest single part of the
Treasury Department. IRS is responsible for collecting most of
the revenues of the United States Government.
Thirdly, as is increasingly becoming apparent, I think, and
as you mentioned, Mr. Chairman, in your opening comments,
Treasury serves a critical role in fighting the financial war
on terrorism. This work touches on several of Treasury's core
functions and involves many of our jurisdictions, our offices,
and our departments.
Treasury implements the financial war on terrorism through
a number of mechanisms, including a new Executive Office of
Terrorist Financing and Financial Crime, which will work with
the International Affairs Terrorist Financing Task Force and
with the office devoted to critical infrastructure protection
in the Office of Domestic Finance. So this war on terrorist
finance cuts through a number of different divisions of
Treasury.
Finally, I would like to add that the Treasury Department
continues to use the five elements of the President's
Management Agenda as a guide to achieving our key priorities in
accomplishing the Department's overall mission.
PREPARED STATEMENT
Let me say in closing here that I look forward to working
with you, Mr. Chairman, with members of the committee, and your
staff as we move in fiscal year 2004 to maximize Treasury's
resources to see that we are doing the best job we can in the
interests of the American people. I am hopeful that together we
can work to make the Department a model of good management and
good service to the American people.
And, with that, I thank you again for the opportunity to be
here and look forward to trying to respond to your questions.
[The statement follows:]
Prepared Statement of John Snow
Chairman Shelby, Ranking Member Murray, and members of the
Committee, I appreciate the opportunity to discuss Treasury's fiscal
year 2004 budget request.
With the creation of the Department of Homeland Security, Treasury
has undergone the most significant transformation in its 214-year
history. The recent divestiture of a majority of Treasury's law
enforcement bureaus and related functions \1\ has provided an
opportunity for Treasury to refocus its core missions. Treasury
continues to fill a crucial role in economic policy making,
international economic development, the financial war on terrorism, tax
administration, banking and financial markets, and the government's
financial management.
---------------------------------------------------------------------------
\1\ The United States Customs Service, the United States Secret
Service, the Federal Law Enforcement Training Center, a portion of the
Bureau of Alcohol, Tobacco and Firearms, and the Office of Enforcement.
---------------------------------------------------------------------------
The budget proposal for fiscal year 2004 totals $11.408 billion. I
am committed to rooting out ineffective programs and will continue the
challenge begun in the fiscal year 2003 budget process for each
Treasury bureau to carefully examine their operations to improve
efficiency and effectiveness.
We have provided the Committee with a detailed breakdown and
justification for Treasury's fiscal year 2004 budget request. I would
like to take the opportunity today to just highlight four areas of
focus for fiscal year 2004:
--Providing economic security, jobs, and growth,
--Ensuring the tax system is fair for all through a comprehensive
compliance effort,
--Serving a critical role in the financial war against terrorism, and
--Maintaining the integrity of our Nation's financial systems and
safeguarding our Nation's currency.
PROVIDING ECONOMIC SECURITY, JOBS, AND GROWTH
Treasury's primary focus is on developing and implementing policies
to provide economic security, jobs, and growth for the American people.
This mission is embodied in the President's Plan for Jobs and Growth.
Its goals are to encourage consumer spending that will continue to
boost the economic recovery; promote investment by individuals and
businesses that will lead to economic growth and job creation; and
deliver critical help to unemployed citizens. The President's proposal
would: speed up the 2001 tax reductions to increase the pace of the
recovery and job creation; encourage job-creating investment in
America's businesses by ending the double taxation of dividends and
giving small businesses incentives to grow; and provide help for
unemployed Americans, creating new re-employment accounts to help
displaced workers get back on the job.
ENSURING THE TAX SYSTEM IS FAIR FOR ALL THROUGH A COMPREHENSIVE
COMPLIANCE EFFORT
A cornerstone of Treasury's mission is helping our citizens meet
their tax responsibilities, while maintaining the fairness of the tax
system for all and respecting taxpayer rights. This is mainly the
responsibility of the Internal Revenue Service, which collects most of
the revenue needed to operate government. This responsibility entails:
--Meeting the annual demands related to processing over 2.6 billion
tax-related documents,
--Sending out over 95 million tax refunds,
--Providing quality service on taxpayer phone calls, email and walk-
in assistance concerning tax law and account-specific
questions, and
--Maintaining a balanced and comprehensive enforcement presence.
The fiscal year 2004 budget provides $133 million of new funding to
focus resources and staffing toward the most significant areas of non-
compliance, resulting in more examinations of high-income taxpayers and
businesses.
Another proposal for fiscal year 2004 permits private collection
agencies (PCAs) to support the IRS' collection efforts while affording
full protection of taxpayer rights, allowing the IRS to devote
resources to more complex enforcement and collection issues. PCAs are
currently used by 42 state tax authorities and by other large federal
programs. By eliciting the assistance of PCAs, the IRS should
eventually be able to handle more collection cases at an earlier stage
in the process--before the accounts become stale and non-collectible.
The fiscal year 2004 budget strives to improve the effectiveness of
the Earned Income Tax Credit (EITC) program by ensuring that benefits
go to those who qualify for them. The EITC program is aimed at
rewarding those who work and helping families out of poverty. However,
in 1999, between 27 and 32 percent of EITC claims--or between $8.5
billion and $9.9 billion--were paid in error. Congress has recognized
this by providing a separate appropriation that has been used for EITC
enforcement.
As a result, the fiscal year 2004 budget requests an additional
$100 million to begin a new strategy for improving the EITC program.
The IRS will begin to use an integrated approach to address potential
erroneous claims by identifying cases that have the highest likelihood
of error before they are accepted for processing and before any EITC
benefits are paid. A key part of this strategy is to begin certifying
taxpayers for the EITC. The IRS will seek to minimize the burdens on
taxpayers by using existing databases and other sources of information
to verify eligibility in advance. This integrated approach is designed
to provide far greater assurance that EITC payments go to the
individuals who qualify for the credit, without sacrificing the goals
of the EITC program.
Fiscal year 2003 and fiscal year 2004 are key transition years for
IRS core systems modernization efforts, as the foundation of our
Nation's tax system is beginning to be replaced, building a bridge to
provide interactive and improved customer service. The fiscal year 2004
budget provides $429 million for the continuation of the Service's
modernization effort in re-engineering business processes and
developing new business systems to replace the antiquated and obsolete
system.
In fiscal year 2003 and fiscal year 2004, IRS will roll out the
first two phases of a multi-year effort to replace the main taxpayer
database. This new database will provide accurate tax account answers
on a real-time basis, enabling IRS to develop new approaches to
simultaneously improve tax collection and taxpayer assistance.
As a partial result of the transfer of nearly 70 percent of the
Office of Inspector General account to the Department of Homeland
Security and the Department of Justice, the fiscal year 2004 budget
proposes a consolidation of the Inspector General services at Treasury,
the Office of Inspector General and the Inspector General for Tax
Administration. While retaining those specific functions outlined in
the Restructuring and Reform Act of 1998 (RRA98), the combined
Inspector General for Treasury will be responsible for providing
oversight to the remaining Treasury bureaus.
SERVING A CRITICAL ROLE IN THE FINANCIAL WAR AGAINST TERRORISM
The campaign to stop the financing of terrorism is a top priority
for this Administration and this Department. Treasury continues to play
a critical role in this vital effort. This work touches on several of
Treasury's core functions, and involves many of our jurisdictions,
offices and departments.
Treasury implements these functions through a number of mechanisms.
Treasury serves as Chair of the interagency Policy Coordinating
Committee, which is responsible for coordinating the day-to-day
development and implementation of policies to combat terrorist finance.
We have also just created an Executive Office of Terrorist Financing/
Financial Crime under the Treasury Deputy Secretary, which will work
with the International Affairs Terrorist Financing Task Force and with
the deputation devoted to critical infrastructure protection and
strengthening U.S. legal and regulatory protections against terrorist
finance in the Office of Domestic Finance.
Treasury continues to play a critical role in the law enforcement
and regulatory communities' fight against terrorist finance through the
Financial Crimes Enforcement Network (FinCEN), the Office of Foreign
Assets Control (OFAC) and the Internal Revenue Service Criminal
Investigation Division (IRS-CI). These entities will report to, and in
the case of IRS-CI work collaboratively with, the newly created
Executive Office of Terrorist Financing/Financial Crime.
The Financial Crimes Enforcement Network (FinCEN) fosters
interagency and global cooperation and serves as a link between the law
enforcement/intelligence communities and financial institutions and
regulators in fighting domestic and international financial crime.
Their strategic analyses of domestic and worldwide money laundering
developments, trends, and patterns provide U.S. policymakers a platform
on which important decisions concerning terrorist threats can be made.
The fiscal year 2004 budget provides FinCEN an additional $6.8 million
for administering additional requirements mandated by the USA PATRIOT
Act of 2001 and subsequent regulatory requirements, including expanding
the Bank Secrecy Act (BSA) to new industries, and accelerates efforts
to enable electronic filing of BSA data more efficiently through the
Patriot Act Communications system.
Through the FinCEN, Treasury continues to support the FBI's
Terrorism Financing Operations Section, the Policy Coordinating
Committee Action Group on Terrorist Financing, and the National Money
Laundering and Terrorist Financing Strategy of 2002 (formerly the
National Money Laundering Strategy).
The Office of Foreign Assets Control administers and enforces the
U.S. government's economic sanctions and embargo programs against
targeted foreign governments and groups that pose threats to the
national security, foreign policy, or economy of the United States.
Since September 2001, Treasury's Office of Foreign Assets Control has
frozen over $36 million in terrorist assets in U.S. financial
institutions. OFAC's designation and asset blocking process has served
as the spearhead of the President's financial war on terrorism.
The Internal Revenue Service Criminal Investigation (IRS-CI)
Division specializes in analyzing complex financial information and
determining whether that information is in violation of tax laws, money
laundering laws, and the Bank Secrecy Act. In addition, IRS-CI is
heavily involved with the Joint Terrorism Task Forces (JTTFs),
Operation Green Quest and similar partnerships focused on disrupting
and dismantling terrorist financing. In particular, IRS-CI is focused
on preventing the abuse of charities by those who support terrorism.
The coordination of Treasury's multi-faceted efforts to combat
terrorist financing and other financial crimes, both within the United
States and abroad, will be led by the newly created Executive Office of
Terrorist Financing/Financial Crimes. This Office, in coordination with
offices within the Treasury and other government agencies, will work to
reduce the risk that the domestic and international financial systems
are being misused by criminals and terrorists, and using these same
systems to identify, block and dismantle sources of financial support
for terror, money laundering, and other criminal activities.
This new office works side by side with the International Affairs
Task Force on Terrorist Financing (TFTF), which was established shortly
after September 11th to track and monitor countries' efforts to combat
the financing of terrorism and to devise strategies to build an
international coalition. The TFTF helps coordinate international
designation of terrorists, which has resulted in a global total of
$124.9 million in terrorist assets being blocked. The TFTF coordinates
Treasury's anti-terrorist financing efforts in the international
financial institutions, multilateral forums such as the G-7 and G-20,
and bilaterally with other finance ministries.
MAINTAINING THE INTEGRITY OF OUR NATION'S FINANCIAL SYSTEMS AND
SAFEGUARDING OUR NATION'S CURRENCY
In fiscal year 2004, Treasury continues its responsibility to
maintain the integrity of our Nation's financial systems and safeguard
our Nation's currency.
The Financial Management Service will continue to improve the
quality of Federal financial management, fully implement debt
management services operations, modernize Government-wide accounting
and reporting infrastructure, and progress toward an all-electronic
Treasury financial system.
The Bureau of the Public Debt will continue its management and
support of the applications and systems used to conduct Federal
borrowing and debt accounting operations, re-enforcing its mission of
providing high quality customer service to investors in Treasury
securities. Public Debt's customers range from individuals with small
amounts to invest, to the largest financial institutions, as well as
the more than 200 Government trust funds.
The Office of the Comptroller of the Currency serves as the
Administrator of National Banks, chartering new banking institutions
only after investigation and due consideration of charter applications
and supervising existing national banks through the promulgation of
rules and regulations for the guidance of national banks and bank
directors.
The Office of Thrift Supervision charters, regulates and examines
Federal thrifts, cooperates in the examination and supervision of
State-chartered thrifts and reviews applications of State-chartered
thrifts for conversion to Federal thrifts. They also review
applications for the establishment of branch offices.
The activities of the United States Mint and the Bureau of
Engraving and Printing are vital to the health of our Nation's economy.
These agencies share the responsibility for ensuring that sufficient
volumes of coin and currency are consistently available to carry out
financial transactions in our economy. They are also responsible for
manufacturing cash products that not only foster domestic pride, but
also promote respect and confidence in the world's most accepted
currency.
The United States Mint receives no appropriation and, under its
Public Enterprise Fund, operates in a business-like fashion that
enables it to respond to the needs of retail commerce. In addition to
producing a reliable supply of circulating coinage--including the newly
designed coins of the 50 State Quarters Program--the United States
Mint will continue to fulfill its mission to produce the Nation's
commemorative coins, medals, bullion coins, and other numismatic items,
as well as its mission to protect the Nation's precious metals and
other assets at Fort Knox and at other United States Mint facilities.
The Bureau of Engraving and Printing is in the process of
redesigning our Nation's paper currency to counter the trend of
computer generated counterfeiting. Building on past security features,
the new design, known as NexGen, may begin circulation in the $20 note
as early as fall 2003, with the $50 and $100 notes to follow 12 to 18
months later.
FOUNDATION FOR SUCCESS--THE PRESIDENT'S MANAGEMENT AGENDA
We continue to use the five elements of the President's Management
Agenda as a guide to achieving Treasury's key priorities, and
accomplishing the overall mission and goals of the Department.
For fiscal year 2002 and 2003, many of Treasury's accomplishments
in implementing the President's Management Agenda were in the area of
expanded electronic government. Specific efforts included:
--The Internal Revenue Service has made significant progress towards
achieving the Congressional goal of having 80 percent of all
tax and information returns filed electronically by 2007. In
fact, as of May 9, nearly 43 percent of all returns were filed
electronically. During 2002, IRS partnered with the Free File
Alliance, a consortium of private sector companies, to provide
free Internet filing of 2002 Federal tax forms for most
taxpayers. IRS has also provided functionality to allow
taxpayers to check the status of their refund on the web.
--In fiscal year 2002, the Financial Management Service issued 73
percent of all payments (666 million of 919 million) by
electronic funds transfer. FMS also collected 79 percent ($1.8
trillion of $2.27 trillion) of all federal receipts
electronically.
--In 2002, the Bureau of Public Debt introduced the Treasury Direct
system, by which retail investors can purchase electronic
Series I inflation-indexed savings bonds. This is the first
step toward the Bureau's goal to convert all savings bond
holdings to paperless form.
Treasury has also set the standard as the best in the government
for improved financial performance, with all of its bureaus now closing
their financial statements within 3 days after the close of each month
and issuing audited fiscal year 2002 consolidated financial statements
within 45 days after the end of each year.
CONCLUSION
Mr. Chairman, while I have served as Treasury Secretary for only a
short time, I have already been deeply impressed by the intelligence,
professionalism and dedication of the people with whom I have worked.
This is especially true during these challenging times.
I look forward to working with you, Mr. Chairman, as well as
members of the Committee and your staff, as we move into fiscal year
2004 to maximize Treasury's resources in the best interest of our
country. I am hopeful that together we can work to make this Department
a model for management and service to the American people.
Thank you again for the opportunity to present the Department's
budget today. I would be pleased to answer your questions.
Senator Shelby. Thank you, Mr. Secretary.
RESTRUCTURING TREASURY
Mr. Secretary, you are a new Secretary, relatively new--not
new to Washington, though--at a Department that has undergone
substantial institutional change since passage of the Homeland
Security Department. With the transfer of the majority of
Treasury's law enforcement missions, how has the Department
reprioritized its other functions to better focus on its core
missions? And how is that focus translating into the budget
request and the DO modernization study?
Secretary Snow. The restructuring of the Treasury
Department as a result of the creation of the Department of
Homeland Security and the transfer of so many of our
enforcement functions has changed the Department in some
fundamental ways, and those changes are reflected in our
budget, Mr. Chairman. We have lost over 30,000 people, so we
are a smaller Department. We have reduced the budget by over
$3.5 billion. And while the Department is smaller as a result
of the Homeland Security transfers and the transfer to Justice
of a part of our functions, I think we are more focused. I
think we have the ability because of this restructuring to put
more concentrated effort on economic policy, which I think is a
core part of what the Department does. That is really the
central mission, as I see it.
Secondarily, of course, the direct responsibilities of the
IRS bulk are much greater now. This will give me much more
opportunity to focus on the effectiveness and fairness of IRS
implementation.
Finally, terrorist finance, I see that as the third major
area. I think our budget this year, Mr. Chairman, reflects
those priorities very much.
Senator Shelby. Mr. Secretary, I know you have lost a
number of employees to Homeland Security, but you still have
thousands of employees. Roughly, how many do you have?
Secretary Snow. Well, we have a little over 100,000
employees, most of whom are in the IRS. The IRS is about 90
percent, I would say, of the people in the Department today.
PRESIDENT'S TAX PACKAGE
Senator Shelby. I want to ask you a number of questions.
The President's tax package included a proposal to eliminate
the dividend tax, and the Senate followed suit by including a
short-term elimination. What we have done, I think, overall has
made investment a better choice for all Americans.
Mr. Secretary, if investment is critical to our economy,
which I think we both believe it is, does it make any sense to
penalize investment with an unnecessary tax like the dividend
tax?
Secretary Snow. Well, not in my view.
Senator Shelby. Not in mine either.
Secretary Snow. I am a strong advocate of lowering the
taxes on dividends.
Senator Shelby. How does repealing the dividend tax help to
restore investor confidence in our securities markets, which we
desperately need to do? And what effect does it have on the
ability of individuals to rationalize risk in the markets? And,
lastly, what effect will that have on corporate governance?
Because on the Banking Committee we have had testimony that
that could change the way a lot of companies operate.
Secretary Snow. I think the dividend proposal is one of the
most far-reaching and significant in recent tax policy because
it will lower the cost of using equity capital. Today, the Tax
Code is tilted because of the lower cost of debt capital
towards greater reliance on debt capital. As a result, the
debt-to-equity ratios in American companies are higher than
they otherwise would be. So a first effect of the proposal
would be to lower the cost of equity capital, encourage greater
use of equity capital, and, thus, change the debt-to-equity
ratios to be more conservative.
One major benefit of that is more conservative debt-to-
equity ratios makes our firms less vulnerable, less stretched,
during periods of economic downturn.
Senator Shelby. It makes them stronger in a way, doesn't
it?
Secretary Snow. It does, Mr. Chairman.
EARNED INCOME TAX CREDIT
Senator Shelby. I just want to get into the Earned Income
Tax Credit for just a minute. The earned income tax credit
compliance effort has experienced problems since its inception.
We know that. I am interested in making sure that the
initiative works properly. We want to make sure that it works
for the people that it was intended to help, but I see no
rationale for not pushing reform to eliminate the errors in
payments to people who don't qualify or if there is an
overlapping qualification, you know, a double hit, because if
we are going to have a program such as the Earned Income Tax
Credit, it ought to be run right. And $9 billion, perhaps more,
erroneous payments, there is no excuse for that in any
situation, and I want to make sure that you have the money to
put the software together or whatever you have to have to run
this program right for the people who are receiving it but
right for the taxpayers who are paying for it.
Secretary Snow. Well, I appreciate that very much, and the
numbers you cited in your opening statement are the very
numbers that look to us to be about right; misapplication of
funds are roughly one-third of the whole program.
But this is not an effort to do anything other than make
sure that the benefits are made available to the right people
and made available in a way that doesn't have us coming back
with post-audit assessments and after-the-fact reviews and
withholdings.
Senator Shelby. If there are people out there, as Senator
Murray mentioned in her opening statement, that aren't getting
it but would qualify for it, reaching out to them and letting
them know about it would make sense. You could pay for that
additional 25 percent of people who are not getting it, as I
heard in her testimony, by eliminating the mistakes and the
fraud in the program.
Secretary Snow. Mr. Chairman, that is our approach: to
avoid what must appear to many people to be after-the-fact
harassment, because we got it wrong in the first place.
I look at this in a very straightforward way: Get it right
the first time, reduce the errors, and the system will function
much better. People will have much more confidence in it if we
get the criteria set right.
Senator Shelby. I think this should be one of your top
priorities. I hope it will be. That kind of money, it makes no
sense to waste.
Secretary Snow. Right.
EXECUTIVE OFFICE FOR TERRORIST FINANCING AND FINANCIAL CRIMES
Senator Shelby. Mr. Secretary, what is the mission of the
newly created Executive Office of Terrorist Financing and
Financial Crimes?
Secretary Snow. This is to give us, Mr. Chairman, a more
coherent and stronger point of attack on financial crimes,
money laundering, and those sorts of things. We think that this
new office will be organized to carry on these activities with
more focus and be more effective.
Senator Shelby. How does this interface with the other
bureaus within Treasury that are tasked with similar missions?
Secretary Snow. There is a close coordination between the
Office of Foreign Asset Control (OFAC), which deals with the
foreign assets and the designation of banks and financial
institutions that are engaged in illicit activities, and the
Financial Crimes Enforcement Network (FinCEN). They are
coordinated.
Senator Shelby. OFAC.
Secretary Snow. OFAC and FinCEN and the IRS Criminal
Investigations. It is sort of a matrix, but there is a
coordination among them. And our General Counsel, David
Aufhauser, serves as the sort of quarterback for these
functions to make sure they are all well coordinated.
Senator Shelby. Mr. Secretary, do you believe that the
Department of Homeland Security has taken too much of what you
have to fight financial crimes, investigating other crime? Or
do you think you will have the resources?
Secretary Snow. Mr. Chairman, I think we have all the tools
that we had before in terms of the enforcement powers--the
PATRIOT Act, other legislative tools, and OFAC--that we need. I
think we will need to rely from time to time on other agencies,
though, to do the actual on-the-ground enforcement and maybe
some of the investigative work.
Senator Shelby. Thank you, Mr. Secretary.
Senator Murray.
EARNED INCOME TAX CREDIT (EITC)
Senator Murray. Thank you, Mr. Chairman.
Mr. Secretary, let me go back to the EITC because I have
some questions on that. I understand that you are requesting
$100 million and 650 FTEs in 2004 to launch this initiative. It
is estimated that 25 percent of eligible families do not
participate in this program, and only $13 million of the amount
you are requesting is targeted on bringing those eligible
families into the program.
Your agency has claimed as much as $9 billion in the EITC
overpayments annually, but there is likely to be between $10
and $12 billion in payments that would be made if all working
poor families were eligible.
I am curious why your agency is requesting so much
additional funding to eliminate the overpayments and such a
paltry additional amount to address the underpayments.
Secretary Snow. Senator, we are requesting the funds that
we think are appropriate to put in place the sort of processes
that will address all the problems and address them
effectively. The biggest problem is this criteria problem.
Senator Murray. It seems to me there are two problems.
There is the problem in payments that are made that shouldn't
have been, but there is also the problem in reaching out to the
working families, 25 percent of the eligibles, who are not.
Correct?
Secretary Snow. Right. Let me ask Ms. Ressel, who has been
working this issue very closely, to respond on that.
Ms. Ressel. I think you are correct that there are two
issues, and it is important to not overlook the first one. If
you think about it in two parts, the first important part is to
find eligible recipients. We have tried to work analytically
with the people who are responsible for putting together this
package; it is my understanding that this is the first year of
a 2- or 3-year plan on what we need to do with EITC.
Analytically, when you look at the investments of the $100
million, the designers of the program tried to invest a certain
amount of money into the infrastructure for the technology to
make sure that the people who were eligible and didn't have an
income problem could be matched through the technology and
never have to audit them again.
Then in parallel, it is my understanding that IRS was
trying to work with the United Way and do an outreach program
for military families.
Senator Murray. Okay. Let me go into that, because there is
only $13 million for the outreach part, and I want to try and
understand, Mr. Secretary, what your strategy is in reaching
out to these working poor families to advertise, in media
outlets, I assume it is, that working poor families are likely
to see.
I have a copy with me this morning of CQ Today, which was
from Friday, May 16th. It is Congressional Quarterly's online
daily newsletter, and it has a nice picture of Senator Nickles
on the front here talking about the dividend tax surviving the
Senate. And in it is an ad on the earned income tax credit.
Now, the CQ, to get it you pay a subscription of $2,430 a
year. I think it is made free to some Capitol Hill offices, but
it is mostly a newsletter that is targeted to lobbying firms
and Government relations offices. And I don't understand how
the use of money to advertise in this is going to help outreach
to poor families who are devoting 20 percent of their annual
income to subscribe to this.
Ms. Ressel. We do not know when that happened, but we will
ask the IRS to respond to you. We do know from our briefing in
preparation for today that a number of the agencies included
welfare-to-work, Health and Human Services, Annie E. Casey
Foundation funds, that we have worked----
Senator Murray. Well, is this part of the funds that you
are using for outreach?
Ms. Ressel. I don't know. We will find out and get back to
you.
Senator Murray. Well, if you could tell me precisely how
much taxpayer money has gone into lobbying Congress----
Ms. Ressel. For that one.
Senator Murray [continuing]. As this appears to be, rather
than to outreach of that outreach money, I would like to know
the answer to that.
Ms. Ressel. We will find out.
Senator Murray. Okay. Let me also ask about the comment
period, because 2 weeks ago IRS testified to our companion
subcommittee in the House of Representatives that there would
be a formal public comment period on this new process and draft
forms would be required to be filled out by working poor
families. And that makes sense since the IRS customarily has a
public comment period for any major changes in procedures and
forms.
However, we are now told that you may be planning to send
out these forms within a few months and that no formal public
comment period has been announced in the Federal Register. So I
need to know, Mr. Secretary, whether the agency is changing
their mind, if there is going to be a public comment period,
and how that will be done.
Secretary Snow. Senator, that is really a matter for Mark
Everson, the new Commissioner, to----
Senator Murray. Doesn't your agency determine whether there
is a formal comment period?
Secretary Snow. Yes, but as I was saying, he will have the
lead on this. At this point, to my knowledge, no decision has
been made about the notice or its publication. The new
Commissioner wants to have a little time on the ground to
review the initiative before he moves forward or we move
forward with the notice.
I would say we would expect to have something fairly soon,
but we have not set a date yet.
Senator Murray. Will there be a formal comment period? That
is a pretty important issue when we are dealing with thousands
of forms that are going to families that have never been vetted
before.
Secretary Snow. I don't know that we have reached a
conclusion on that yet. I would want to hear the IRS
Commissioner's recommendation.
Senator Murray. Could we get an answer back to the
committee on that, please?
Ms. Ressel. Sure. We will give you an answer. But I would
like to talk to the IRS Commissioner first.
Senator Murray. Okay. I understand.
Well, I will tell you that last month the Acting IRS
Commissioner assured me that your agency would be getting a
thorough evaluation of the impact of this new process on EITC
participation before you expand your effort to 2 million
working poor households, and I want to ask again: Will your
agency be getting a thorough evaluation on the impact of this
process before we expand it to 2 million households?
Secretary Snow. I think there is a major effort underway,
an outreach program, to hear from taxpayers and taxpayer
groups. Certainly we will want to draw broadly on taxpayer
responses on this.
Senator Murray. Mr. Secretary, what we want to know is
whether there will be information on the impact to the working
families before we broaden this out to 2 million families and
have a complete disaster--or maybe a complete success. Are you
going to look at it first, as we were told originally, or not?
Secretary Snow. Senator, yes, this matter is being studied
pretty carefully, and I understand there is a pilot program
underway right now.
Senator Murray. That was our understanding. There was a
pilot program; we would look at the results of that before we
expanded it to 2 million people. I am concerned now that before
we ever look at the results, determine whether or not there was
complete confusion on a sentence or a pause or a question or
anything, that we then send it out to 2 million people and
exacerbate a problem that we could solve by doing a pilot
project.
Secretary Snow. Senator, let me say, we are not going to
put this out until we have great confidence that it will work.
EXTRATERRITORIAL INCOME (ETI)
Senator Murray. Okay. Well, we will be following this very
closely. I agree with you we need to find tax fraud, but I also
think we need to do it correctly; otherwise, we are going to
create problems for a subset of people in this country that I
don't think is very fair.
Let me move to another question. On April 1st, I sent a
letter to the United States Trade Representative Bob Zoellick
expressing my serious concerns regarding the Administration's
support for simply repealing the Extraterritorial Income
Exclusion Act of 2000 in response to a dispute with the
European Union. I could have sent this letter just as easily to
you. I know that international tax policy is part of your
Department's responsibility. And I am very concerned that the
Administration is proposing to leave U.S. exporters and U.S.
workers at a severe disadvantage to our foreign competitors.
The Administration's position on the FSC/ETI issue is a job
killer for my home State of Washington and the Nation, in my
estimation. Given your background and your short tenure in the
Administration, I would just like to hear your views on the
issues and find out if the Administration is going to continue
to support a full repeal of the ETI. Or do you have any
comments on the various legislative proposals that are before
us on this?
Secretary Snow. Well, Senator, that is a matter we are
beginning to get into with real earnestness. The President has
made it clear that he would like to see legislation this year
to deal with the World Trade Organization (WTO) issue. We are
facing sanctions from WTO, sizable sanctions, unless we show
progress on the issue. We are intent on trying to be helpful in
moving a legislative vehicle. The cornerstone of it, though,
must be something that is WTO-compliant, and from our point of
view, doesn't prejudice American businesses. So we----
Senator Murray. In your opinion, should we just back off? I
am hearing some of the Administration just say we should just
back off and surrender our export incentives. Is that your
opinion?
Secretary Snow. Senator, I don't want to offer a premature
view on our position. What I want to do is see legislation that
will protect the interests of American businesses and avoid
anything that is prejudicial to American businesses, while
getting legislation through so we are WTO-compliant.
We have tried various things, two or three series of
adaptations to try and get compliance; and they have all been
found to be non-compliant. I think this time it is very
important that we get compliance. But through our Office of Tax
Policy, we are engaged in a serious and far-reaching set of
discussions with American business to make sure we can come up
with the very best set of proposals, and until we are a little
further down the road with those discussions and those
analyses, I think it would be inappropriate for me to say what
precise form the legislation should take. But we are getting
closer to the point where we are going to have to do that.
Senator Murray. I thank you, Mr. Secretary. I know my time
is up. I just think it is really important that we do not back
off and surrender. I hear people saying they don't want a trade
war. Well, I think it is the Europeans who have declared a
trade war on this country, and I think we need to push back and
find a solution because it is so important to so many people
who have jobs in this country and depend on this.
Thank you, Mr. Chairman.
Senator Shelby. Senator Byrd.
STATEMENT OF SENATOR ROBERT C. BYRD
Senator Byrd. Thank you, Mr. Chairman.
Mr. Snow, we have had very good relations in the past.
Secretary Snow. Thank you.
Senator Byrd. And I look forward to working with you. I
compliment you on being the new Secretary. You follow a line
that goes back to the very beginning of the Republic, and, of
course, the first Secretary was Alexander Hamilton, probably
the greatest of all. And you will recall that he died on July
11, 1904--he died on July 12, 1904--1804, as a result of a duel
with Aaron Burr, which took place the day before, on July 11,
at Weehawken, New Jersey. And he lived through the night with
excruciating pain, with his dear wife and seven little children
around him, crying. He died on the 12th. A great Secretary. A
great Secretary of the Treasury.
I just recall those things about Hamilton because I once
wrote a paper on the great enigma, Aaron Burr. I won't go into
that at this point except there was a good side of Aaron Burr.
Of course, we know about the dark side. But there was a good
side. He had a daughter named Theodosia, whom he revered, and,
of course, she idolized her father, Aaron Burr.
PRIVATE COLLECTION AGENCIES
But so much for that. The IRS seemed determine to hire
private debt collection agencies to pursue delinquent
taxpayers. Did you know that the Romans did that also? Yes, the
Romans tried that. And you may recall the latafundia. The
latafundia gathered up farms, and the little farmers in
Appenines migrated into the cities and joined the mob seeking
free bread and theaters. Anyhow, it didn't work so well with
the Romans, nor did the letting out of the taxes, the tax
collectors. You might do well to go back and review the
experiences of the Romans, out of the Roman Republic.
Two pilot projects--now we will get back to our own
Republic, and this is a Republic. Two pilot projects in 1996
and 1997 were authorized by Congress to test the private
collection of tax debt. The 1996 pilot flopped so badly that
the 1997 project was canceled. Contractors used aggressive
collection techniques and failed to protect the security of
sensitive taxpayer information.
Even if privacy guarantees are built into the law, the IRS
does not have enough personnel to monitor the work of
contractors and to enforce privacy protections for taxpayers.
In an age when private protections are under assault and
identity theft is rising at a head-spinning rate, turning the
duties of taxpayer collections over to private firms with
limited accountability to the American people is just plain
nuts.
If the President's budget does not request adequate funds,
Mr. Secretary, for the IRS to do what is inherently a
governmental job, why is the Department not asking this
subcommittee for more money? Why are you risking the privacy
rights of the American taxpayers on a scheme that had already
failed when the Department could simply request more money to
hire additional IRS personnel to track delinquent taxpayers? So
why is the subcommittee not being asked for more money for that
purpose?
Secretary Snow. Senator, I think the answer is that the
Department felt that the resources of these very talented IRS
agents could better be used on the more complex cases than the
simpler cases that involve acknowledged obligations. That is
what the private collection people will focus on. The so-called
low-hanging fruit of the system will lead to a better use of
the scarce resources of the Internal Revenue Service.
Senator Byrd. So, in essence, you are suggesting, I
suppose, that it is cheaper to contract out those services.
Secretary Snow. More effective, I think is the way I would
put it, Senator. We have a new Commissioner at the IRS.
Actually, he has come from OMB. Prior to that, he had been in
the private sector. Mark Everson----
Senator Byrd. You won't hold that against him, will you?
Secretary Snow. No, I won't. I have talked with Mark about
this. He in a sense is being held by his own petard here
because as an OMB person he helped to structure the budget of
the Department of the Treasury. Now he is going to be forced to
live with his own policies.
But he is convinced, Senator, that the budget that has been
requested will allow for more effective enforcement of the Code
and more effective collection of the revenues and be fairer to
the taxpayers.
Now, Mark and I have scheduled a weekly meeting. We are
going to continue to review this matter. We are going to
continue to be open-minded and review this private collection
activity. Ms. Ressel has told me about the mistakes that were
made in the past that you have talked about here. If this isn't
going to work, we will be the first to tell you that it doesn't
work. The experience last time around was one that we need to
benefit from, use to our advantage, and not make the mistakes
of the past.
But, Senator, if we need more resources, I will be the
first to tell you. If this project doesn't produce results, we
will be the first to tell you as well.
Senator Byrd. The National Treasury Employees Union cites a
cost analysis put together last September by former IRS
Commissioner Charles Rossotti, and that analysis said that if
the Congress would appropriate an additional $296 million to
hire additional IRS compliance staff, the agency could collect
$9.5 billion in tax debts annually. That is $32 for every
taxpayer dollar spent compared to $3 for every $1 paid to a
debt collection agency.
This is a study performed by the Bush Administration, and
if we are looking for the best value for the American taxpayer,
why should the Administration be advocating a proposal that
costs more and does less to protect the privacy rights of
taxpayers?
Secretary Snow. Senator, Ms. Ressel is much closer to this
because she wrestled with these issues in coming up with this
budget. She is the principal, the CFO of the Department. So,
Teresa, I am going to ask you to give the Senator the response.
Ms. Ressel. Senator Byrd, your comment about the ratio is
correct: Mr. Rossotti had asserted that it was about 30:1 if
the revenue collection is done inside the agency----
Senator Byrd. Yes.
Ms. Ressel [continuing]. And that if you use the collection
agencies, that it would be a much different ratio.
My understanding of this proposal is that it will be for
the simpler cases. From listening to Commissioner Everson's
testimony before you the week before last was that his big
theme was that if you were to add additional resources to the
IRS--and that might be something that Mark thinks he needs and
he will work out with Secretary Snow for 2005--that they would
not be used for this particular issue.
And so it is my understanding that that is the rationale
that they used. It may not make sense at all when you look at
the ratios, but no matter how many resources you may add to the
IRS incrementally, there will always be something that they
can't cover. If you used that logic, then perhaps that is where
the Commissioner and the IRS team basically look at this. They
look at this as a very low-end issue relative to covering an
item that, even if you added an additional $1 billion, that
they wouldn't dedicate the money to this. That is my
understanding of the situation and the way they looked at the
resources, sir.
Senator Byrd. Mr. Secretary, my time is up, but I have to
say that I am very, very suspicious of the privatization
scheme. It seems to be stretching pretty much across the board
with the Administration. Congress needs to oversee it very,
very carefully, and we will be watching and listening for the
record that you intend to make here and for the information
that you will follow up with to this subcommittee on this
subject.
Secretary Snow. Mr. Chairman, those are fair comments; we
will keep you well advised on this. If it doesn't pan out the
way we hope it will, we will be the first to acknowledge that.
We have to acknowledge that in the past this didn't work out
very well, and there are some reservations this time. We are
hopefully going to make a success of it, and learn the lessons
of the past. But if we don't, I commit to you we will
acknowledge that.
Senator Byrd. Very well. Thank you, Mr. Secretary.
Senator Shelby. Senator Specter.
STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Thank you very much, Mr. Chairman.
Mr. Secretary, welcome to this subcommittee on your first
appearance since being sworn in.
Secretary Snow. Thank you.
ECONOMY
Senator Specter. Unanimously approved, that is a pretty
good start with the United States Senate.
Mr. Secretary, we are on the verge, as you know, of passing
a tax cut, and one of the questions which is asked of me
continuously as I travel through my State is the impact on the
economy. What is the likelihood that there will be a
significant benefit? And we know that we have a $10 trillion
economy. Over a 10-year period with inflation, it comes to
about $140 trillion. The President advocated a $726 billion tax
cut. I supported that. The House came in at $550 billion, the
Senate at $350 billion. And I supported the President because I
think it is worth a try. And he has formulated the plan, and I
think we ought to give his leadership a try at what he has.
There have been a lot of contentions that there is a lot of
posturing on all sides, one group playing to its base on one
line, et cetera, and it has been one of the most contentious
issues that I have seen in my tenure in the United States
Senate.
Vice President Cheney was on hand to break a 50/50 tie on
one of the amendments, and then he had to sit around for 2
hours while the managers' report was structured. This was the
first time I saw a Vice President sit in a Senator's chair.
Senator Byrd, I have to question--I should have come to
you--whether that was appropriate. Anybody who sits in a
Senator's chair besides the Senator would get a fast escort by
the Sergeant-at-Arms out of the chair. A Member of the House
was in last week, sat down, and it was almost as if he was in
the electric chair, he got up so fast when he was prompted.
But I mention the Vice President to demonstrate how close
it is. You are a Ph.D. in economics as well as an L.L.B. and a
corporate executive of great standing, and now Secretary of the
Treasury. What is the best articulation that this tax cut at
any figure--at the $350 billion figure, which it appears to
be--will have a significant impact on lifting up the economy?
TAX CUT
Secretary Snow. Senator, the economy is in a recovery, but
it is a weak recovery. The tax plan that I hope comes out of a
conference soon will, in my view, give the economy a lift for a
couple of reasons:
One, it will put more disposable income in consumers'
pockets. As people have more money in their pockets, they tend
to spend more.
This has a particularly important effect on small business
because so many small businesses pay their taxes through the
individual tax return--23 million of them--and those 23 million
businesses will become more profitable because of the tax plan.
As businesses become more profitable, they become more inclined
to make capital expenditures. Our economy is weak is on the
capital expenditure side, yet we have consumers staying pretty
strong. We have a strong housing market. It is the business
expenditures for capital and expansion that have been weak.
Small business is the principal engine. So I would say that
more money in people's pockets and making small business more
profitable will lead to more spending and expansion.
There is also that provision immediately giving small
businesses another $75,000 a year of free cash flow. That will
be helpful.
Then I would go to the dividend side and say that is
important as well. To lower the costs on paying out equity
capital makes equity capital more attractive, which should help
the stock market. We are now an investor society with half of
the American households owning equities. A rising stock market
will buoy the spirits of the American consumers and businesses.
I think this plan is well calculated to lift the growth
rates of the economy by as much as one percentage point this
year and another close to one next year, taking us from the
sort of anemic 1.6 growth rates that we have today to growth
rates that are up in the mid 3's. Once we get to the mid 3's,
then we begin to move back up towards a full employment
economy.
Senator Specter. If the cut had been or were to be $726
billion instead of $350 billion, what greater percentage
increase would that project?
Secretary Snow. The way the Congress has structured the
provisions in the package, it seems to be moving through both
the House and the Senate. It is front-loaded in the sense that
it has a lot of the impact that the bigger package would but it
has a shorter period of time, and there are sunsets, which will
have early-year impacts. In fact, in some ways it has been
front-loaded to have more impacts in the early years. So for
2003 and 2004, the way it is structured, I think in both the
House and the Senate, could have more impact in the early years
than the initial package.
Senator Specter. So you are saying the $726 billion would
not necessarily have given a greater boost?
Secretary Snow. I don't think it would have had a
discernibly greater boost in the early years. I think it would
have a greater boost for economic growth over the full period.
Sure, the bigger, the better, as far as I am concerned,
Senator. The way it has been structured, I think you will get
most of the benefits, even though the numbers have come down.
But I think to get the full benefits, it will be incumbent to
come back in a couple of years and move those dates out. The
tax provisions that sunset in 2005, and so on, I think should
be made permanent, or at least added years to them.
PRIVATIZATION OF TAX COLLECTIONS
Senator Specter. Mr. Secretary, I would pick up just for a
moment on what Senator Byrd said about privatization of
collection. I opposed an amendment which would have prohibited
the Treasury Department from going to private collection
agencies because I think it is a matter that you ought to
decide. We ought not to micromanage your Department on that
particular matter. But I have a concern that a private
collection agency may engage in tactics which a governmental
agency would not. It is analogous to a quasi-judicial function.
Some private collection agencies do things which really ought
not to be done. They may be within the letter of the law and
sometimes they are not even there; whereas, a governmental
agency is going to have a little different perspective, try to
collect debts but do so in a fair way. So I urge you to keep a
close watch on that particular aspect.
I do share a concern with the power of the Federal
Government and the Department of Justice and their Civil
Division, and you have got a lot of lawyers in the Treasury
Department, and you are a lawyer yourself, as some of us are on
this panel. There would be good reason to think you would have
enough muscle, skill, and expertise to do the collections. But
if you are determined not to, take a close look at the
practices the collection agencies use.
Let me ask as my final question--I am under a minute now--
as to the $133 million to expand efforts to enforce fair
compliance among high-income taxpayers and businesses. What do
you expect there?
Secretary Snow. Senator, this is a matter that I intend to
spend a lot of time on with Mark Everson, the new IRS
Commissioner. What we expect is that high-income people and
businesses will be held to the same tough-minded enforcement
standards that the populace at large is. Over time, the clever
tax avoidance schemes have become more and more complicated,
more and more involved, and require more skilled and dedicated
efforts to penetrate them. This is an effort to make sure we
penetrate those clever tax avoidance schemes that are used by
corporations and high-income people in a purposeful way and
make sure that they are paying their fair share of the tax
burden as well.
And on your prior point, I am in total agreement with what
you and Senator Byrd said. We are going into the private
collection activity wary of the risks, concerned about the
potential problems that you and Senator Byrd alluded to, and
committed to doing our very best to avoiding them. But if they
are unavoidable, if they materialize, then we are going to be
the first to say this doesn't work and this is the wrong way to
go.
FLAT TAX
Senator Specter. Mr. Secretary, let me ask you a question
for the record, which is an involved question, which I would
appreciate your study and response to, and that is on a flat
tax proposal. The Senate passed a resolution to push ahead with
our Finance Committee and our Joint Economics Committee with
analysis of a flat tax. And the model most frequently cited is
the Hall-Rabushka model, two professors at Stanford.
Secretary Snow. Right.
Senator Specter. And I believe the flat tax has never
really been considered. I put a bill in back in the spring of
1995, and others have proposed it, and I would be interested to
see a study--I was about to say ``a serious study,'' but I know
any study you do will be serious. And let us respond to this
subcommittee with what you think, because there is an occasion,
after all the problems we are having with the tax cut, and we
are nibbling at the edges and barely doing that, it is time we
really gave a serious line of analysis. And I would appreciate
it if you would undertake that, Mr. Secretary, for your
Department.
Secretary Snow. We will do that, Senator, and get back to
you on that.
Senator Specter. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
ECONOMY
Senator Shelby. Mr. Secretary, I want to talk to you a
little bit about the economy. We have the largest economy in
the world. I believe the Japanese is second and the German
economy is number three. Is that correct, sir?
Secretary Snow. That is right, yes, sir.
Senator Shelby. The Japanese economy is sputtering along.
They have deep problems, as we both know, in the banking sector
that they have not really addressed.
The German economy is the locomotive of Europe, has been
and probably will be. I saw the other day where it had gone
into a recession, the numbers. Is that correct, sir?
Secretary Snow. Yes, Senator, it is. They reported negative
growth rates for two quarters in a row.
Senator Shelby. What is the status of the Japanese economy?
Is it growing or is it sputtering, but is it growing?
Secretary Snow. It is growing, but modestly. I have just
returned from meetings with the G-7 and had a bilateral
discussion with Minister Shiokawa, the Finance Minister of
Japan. He indicated that they would have positive growth for
their fiscal year, which begins April 1, but that it would be
in all likelihood less than 1 percent.
Senator Shelby. Our economy seems to be uneven all across
the country. It depends, in my State of Alabama, we have got
counties with 3 percent unemployment, 3.5, 4, and then we have
some much higher.
Secretary Snow. Right.
Senator Shelby. But I see that around America.
Secretary Snow. Yes, I agree. It is uneven.
Senator Shelby. How do you see our economy growing? We are
in the second quarter of the calendar year now. Will it pick up
in your estimation, in your judgment, remarkably so? And I am
not talking about a hot economy. I am talking about a movement
toward an economy where people are hiring again, where managers
have confidence that they are going to sell their products and
so forth. Do you think that we will pick up by the fourth
quarter of this year?
Secretary Snow. Senator, I think we are in a recovery with
many elements of a stronger recovery in place: low interest
rates and high productivity, evidence in the first quarter that
corporate profitability is returning, and of a very good
housing market, which has helped offset some of the adverse
effects of the stock market.
Senator Shelby. Without the housing market, without low
inflation and low interest rates, the economy wouldn't be where
it is today, would it?
Secretary Snow. Absolutely. Those have been keys to our
success, and the consumer who has stayed in the game continues
to be quite engaged in spending money.
I think, Senator, that the elements are there for a good
recovery in the second half. I think the tax plan, if it gets
adopted here soon, will be a real plus and will add to the
growth rates. I would look to growth rates in the fourth
quarter getting back up towards where they should be.
Senator Shelby. Two and a half percent?
Secretary Snow. Two and a half to 3 percent could well be
the number.
Senator Shelby. A 2.5 percent growth rate, although we
would like it higher, would be an improvement.
Secretary Snow. A very marked improvement--that is that 1
percent pick up that I said I think is in the cards for us.
Senator Shelby. I saw where the 10-year bond, I believe,
closed yesterday at 3.50?
Secretary Snow. Lowest in 40 or 45 years.
Senator Shelby. Now, that bodes well for people who are
refinancing their home, their businesses, and so forth, does it
not?
Secretary Snow. It absolutely does. Therefore, if we can
get these low interest rates and some pickup in aggregate
demand, I think the economy could begin to make a nice, strong
recovery. I would also mention, Mr. Chairman, the fact that
corporate America, which in the late 1990s was expanding a lot,
growing, merging, and so on----
Senator Shelby. Created a lot of capacity.
Secretary Snow. Created a lot of excess capacity, and we
have excess capacity hanging over a number of industries today.
We have corporate America leaning out its costs and becoming
much more productive, learning to do more with less. That is
hurting us on the employment numbers. But when the aggregate
demand picks up, I think our corporate sector is poised to have
much higher profitability, and as they get higher
profitability, then I think we are going to see the expansions
begin.
Senator Shelby. Mr. Secretary, we have talked about this
before, with another hat on, as Chair of the Banking Committee.
We are very concerned about investor confidence, the erosion of
investor confidence in our capital markets.
Secretary Snow. Right.
Senator Shelby. We have a new SEC Chairman, Bill Donaldson,
that I have great confidence in at this point in time. But I
don't see the investor confidence returning to the marketplace
yet, yet we know that approximately 100 million Americans, more
or less, are investing, directly and indirectly, in our capital
markets--bonds, stocks, and so forth, through pension funds,
through 401(k)'s and everything else.
If people don't have confidence in the corporate sector, in
our accounting profession and so forth, how do you turn that
around?
Secretary Snow. Senator, I think that corporate behaviors
are changing in a very positive way. With your work on the
Banking Committee, and the new legislation that came through
there in the wake of the corporate scandals--the changes in the
New York Stock Exchange and in Nasdaq rules--the fact is that
virtually every corporation in America has gone through a self-
analysis to determine whether it is living to the highest
standards of corporate governance.
I think the corporate sector is getting its own house in
order. That needs to continue with the corporate sector taking
the responsibility for making sure its conduct is of the
highest order.
Senator Shelby. That honesty and ethics matter, right?
Secretary Snow. That honesty and ethics are at the core of
things. I would add a thought on the dividend proposal. If
something like the President's dividend proposal is adopted and
we go to zero tax on dividends, I think it would have far-
reaching effects on corporate behavior.
Senator Shelby. I asked you that question earlier.
Secretary Snow. You did, and I am going to get back to it
now. Companies that pay dividends have to earn cash, they can't
pay dividends through financial manipulation. They have got to
do it the old-fashioned way. We still have laws against
counterfeiting. What will happen in a world in which dividends
aren't taxed the way they are today is that companies will pay
more dividends. As the investors see companies pay more
dividends, they are going to reward dividend-paying companies.
That will encourage companies to do the right things: to focus
on free cash flow, to manage their businesses for the investors
so they can pay dividends, and then dividends will become a
much bigger part of the story of corporate America.
As that happens, I think it will go a long way to restoring
confidence in corporate behaviors. I think it could lead, Mr.
Chairman, to a dramatic change in corporate behavior.
Senator Shelby. And the way people look at stocks, right?
Secretary Snow. And then the way people look at stocks,
exactly.
ACCOUNTING PROFESSION AND CAPITALISM
Senator Shelby. How important, Mr. Secretary, is the
accounting profession to all of us, the capital markets, the
publicly traded stocks? How important?
Secretary Snow. They are the bedrock foundation of our
confidence and trust, and capitalism really rests on trust.
Investors can't dig into the numbers. They have got to trust
the people who do the numbers. Trust is absolutely at the
center of a well-functioning market economy. There is a huge
responsibility that the accounting profession has as the
guardian of the numbers, the custodians of that fundamental
trust.
Senator Shelby. And once it is lost, it is hard to get
back.
Secretary Snow. Senator, that is what we are experiencing
today. One reason I think our markets are suffering today, and
are so much less buoyant, is that trust has been eroded. It
takes time to build back trust. What you have done in the
Congress I think is very helpful. What the Securities and
Exchange Commission (SEC) is doing under Chairman Donaldson is
very helpful. I think now what the corporate sector is doing
and what the oversight board will do will help restore trust.
But I think we need to be clear that trust has really been
put in peril, been jeopardized. I am convinced one of the
reasons this economy isn't performing better is just that. In
fact, in Europe, the G-7 Ministers have some of these same
problems in their corporate sector. Now they are beginning to
look at what you did in the Banking Committee and say we need
rules on corporate governance like those rules to restore
trust, to create a foundation of trust.
GLOBAL ECONOMIES
Senator Shelby. Secretary, lastly, for this round, if the
Japanese economy is sputtering along, the German economy is in
recession, and we are so interdependent on trade both ways, if
they continue to sputter, that has an effect on us. How do you
view their economies--I know you look at it; you have to--to be
picking up? Or would you rather save that?
Secretary Snow. No, I would like to answer that. One of the
themes that I have been taking to the G-7 countries is the need
for our interdependence. Our prosperity depends on yours, and
yours depends on ours. We are working hard to get the American
economy to grow faster, and you need to grow faster, too. Your
growth rates are even lower than ours. Your growth rates are
about half of ours and your productivity rates are much lower.
Can't we come together in a consensus that promoting economic
growth is in all of our interests?
I am pleased to say, that in Germany, the Schroeder
administration is now pushing some major tax reforms. In France
they are pushing some significant pension reforms. In Japan, of
course, banking reforms are a major theme and deregulation of
some of their retail and other things. It is more than monetary
and fiscal policy, as important as they are. Well-functioning
economies also look at the microeconomic characteristics and
create open and free flow of resources and make sure that
things like their pension plans don't exact too large a burden
on the total fiscal situation of the country.
I am encouraged that Germany, Japan, and France are taking
seriously this need for growth and are addressing these
fundamental problems. But they are looking to us, too, Mr.
Chairman.
Senator Shelby. But isn't the U.K. economy one of the best
in Europe?
Secretary Snow. The U.K. economy is probably the best major
economy. Canada continues to perform pretty well. But as you
said, Japan is viewed as the engine of Asia and Germany as the
engine of Europe, and they are both sputtering.
Senator Shelby. Thank you.
Senator Murray.
ECONOMIC SANCTIONS AGAINST IRAQ
Senator Murray. Mr. Secretary, Iraq has been under
international economic sanctions now for more than a decade.
The sanctions have stopped numerous business deals from going
forward. These business deals were negotiated by Saddam
Hussein's government, and some of these deals were blatantly
negotiated to undermine the sanctions regime.
Can you tell us what the Administration's position is on
these business deals that were negotiated by Saddam Hussein's
regime? And does the Administration believe the new Iraqi
Government should be bound by Saddam Hussein's commitments?
Secretary Snow. Well, the Administration is very much of
the view that the sanctions should be lifted, the oil sanctions
should be lifted, and the general sanctions should be lifted to
allow the Iraqi economy to get back on its feet. It is very
important, I think, to recognize just how much damage the
Saddam regime did to the people of Iraq. The economic
institutions of that country were hollowed out and
significantly undermined during that regime. The standard of
living of the country fell. They had negative growth rates for
nearly two decades. What we are dealing with in Iraq today, in
terms of the rebuilding and reconstruction, are not the results
of a 3-week conflict, but really nearly three decades of
mismanagement and misrule.
We are hopeful that our--and Treasury is very much,
Senator, involved in this effort with a number of advisers over
there right now looking at the question of setting up a central
bank. Iraq has not had a central bank. Their central bank was
really an apparatus of the dictator's regime. They haven't had
a private banking system--they had a command-and-control
banking system.
They don't have a budget. They haven't had a budget in any
number of years. They don't have a set of national account
statements, and they have a fairly chaotic currency.
There is an enormous amount of this foundational work to be
done.
Senator Murray. But what I specifically wanted to find out
from you was whether the new Iraqi Government should be bound
by Saddam Hussein's commitments, and let me give you an
example. Saddam Hussein's government negotiated a deal with
Airbus to purchase five aircraft, and they paid a $10 million
deposit to Airbus for that aircraft. And I want to know whether
the Administration believes that Iraq's new government should
honor Saddam's Airbus purchase. And if not, will the
Administration call upon Airbus to return the $10 million to
Iraqi people?
Secretary Snow. Senator, I think that is really a question
that ought to go to the State Department. I am not really
knowledgeable enough on the treatment of those issues.
Senator Murray. Well, but I understand you were just at the
G-8 conference in Europe, and I am certain you discussed some
of these issues over there. Was there any talk about these
commitments that had been made and how to--whether or not we
should be demanding that that money be returned?
Secretary Snow. There was discussion of the issue of the
debt. There was a discussion of how to deal with the debt going
forward. Iraq has very heavy debt obligations, estimated at
$80, $90, to well over $120 billion in an economy that is, of
course, very small relative to that. So those debt levels
aren't sustainable.
The G-7 Ministers decided that we needed to look at that
situation. We recognized that debt repayments cannot be
expected for some considerable period of time, and we agreed to
take measures to quantify that debt. There is a group called
the Paris Club, which is the significant creditor nations of
the world, that meets in Paris and has a process for working
through sovereign debt that is large relative to its
sustainability. And the Paris Club has been asked to assess the
situation and come up with suggestions on what should be done
with regard to that debt.
The Ministers asked the International Monetary Fund (IMF)
to do an assessment of the non-Paris Club debt--debt that comes
from parts of the world that are not members of the Paris
Club--Central Europe, for instance. The IMF has begun that.
The debt issue was clearly on the table. I think there is a
recognition that a lot of that debt is going to have to be
reworked one way or another.
Senator Murray. Well, can you answer the question
specifically about contracts that had been made? Airbus is just
one example of a number of business deals that were negotiated
by the regime, and I just think Congress would be very troubled
to see U.S. funds to reward those who supported Saddam Hussein
and worked to undermine economic sanctions.
Secretary Snow. Senator, yes, I see where you are coming
from. That issue did not come up at the G-7 Ministers
conference.
Senator Murray. Let me just ask you, can you assure this
subcommittee that U.S. funds will not be used to honor business
deals negotiated by Saddam Hussein's regime?
Secretary Snow. Senator, I think that really is a question
for Colin Powell, the Secretary of State. I am not in a
position to respond. I am sorry.
REBUILDING IRAQ
Senator Murray. All right. Well, again, let me go back to
some of the other issues that you must have discussed at the
Ministers meeting. One of the issues of concern to the
Appropriations Committee is the anticipated long-term costs of
rebuilding Iraq. We have been told that there will not be
another supplemental request for Iraq this year. And if you
could, share with us what the Administration's latest thinking
is on the participation of the United Nations and other
countries that did not join the coalition in the Iraqi
rebuilding efforts. And did you discuss this issue with your G-
8 colleagues over the weekend?
Secretary Snow. Well, as I mentioned, we discussed the debt
issue, which is an important issue for the rebuilding of Iraq.
We did discuss a donor conference and set in motion some steps
to set up a donor conference later this year, which I think can
be important.
We also talked about the vesting of the assets of the
Saddam regime so that they could be made available for the
benefit of the Iraqi people. Assets of Saddam and the regime
are found in the banking system and financial system of a
number of countries around the world. The United States has
taken a lead in getting countries to go after those assets, and
in effect, seize those assets, and then make those assets
available to the Iraqi people for the rebuilding process.
The United States vested, pursuant to a Presidential
Executive order, about $1.7 billion of Iraqi assets that had
been held in our banking system. By vesting, I mean we seized
them in the name of the Iraqi people for the rebuilding of
Iraq, and for the benefit of the Iraqi people.
There are maybe another couple of billion dollars around,
maybe more, and we would like to make sure that money is seized
and made available for the benefit of the Iraqi people as well.
So that subject was discussed, and there was broad agreement on
the part of the Ministers that they would pursue that same
strategy that we have pursued.
Senator Murray. Can you give this committee any estimate of
what the Administration hopes the international community will
contribute to Iraq?
Secretary Snow. I don't think we have an estimate of that.
I think that, just as in Afghanistan, there will be a good
response. I think the response there was close to a billion
dollars, $900 million. Iraq is bigger and has bigger problems,
so I would hope the donor fund would be even larger.
But I think we have to recognize that the principal source
of funding for Iraq for the future will be the Iraqi oil
monies. The sooner that the oil flows can resume, the better.
Iraq, unlike Afghanistan, is an inherently very wealthy country
if those oil resources are put to good uses.
So I am hopeful that the oil will flow soon and that the
volumes will come up back to the old levels.
Senator Murray. The estimates on the oil flow are that it
is going to take a while.
Secretary Snow. I think it will take some time. I am not an
expert on that, but I see no reason from what I know about it
that it can't get back up to 2.5 million barrels a day.
Senator Murray. So in your discussions over the weekend,
did you sense that the donor conference was something that
would be accepted and we would see contributions from----
Secretary Snow. Yes, I did, very much so.
TAX BILL
Senator Murray. Let me ask just one final question, Mr.
Chairman, on the Republican tax bill in the Senate that just
passed last week. There is a provision that taxes Americans who
are working overseas by $35 billion, and I supported the Breaux
amendment that tried to strike that provision from the bill
because I think that when American workers go abroad, they are
ultimately followed by exports from the United States to the
benefit of our workers who are here at home. And I wanted to
find out from you whether you supported that $35 billion tax
increase on Americans working abroad. And do you believe this
provision will reduce U.S. exports?
Secretary Snow. Well, that was not in the original proposal
that we sent to the Congress. It found its way into the Senate
Finance bill, I am told, to create an offset. The offset
allowed the legislation to move forward within the $350 billion
budget constraint that was established through negotiations
among the various Senators.
Senator Murray. I know how it got there. I was just
wondering whether you supported it.
Secretary Snow. I don't think we have taken a position on
it. We saw it as an accommodation to make possible the passage
of the legislation. I am told that there is very little
prospect of it surviving a conference.
Senator Murray. Thank you very much, Mr. Secretary, Mr.
Chairman.
Senator Shelby. Senator Byrd.
DEFICITS
Senator Byrd. Thank you, Mr. Chairman.
Secretary Snow, during your recent appearance on May 11 on
``Meet the Press,'' you differentiated between deficits during
times of full employment and deficits during times of under-
employment. You suggested that, depending on the state of the
economy, deficits are sometimes good, sometimes bad.
On the other hand, the Administration has advocated a
belief that tax cuts are good no matter what the state of the
economy or the Federal budget may be.
In 2001, the Administration said that we need tax cuts
during times of full employment. In 2003, the Administration
said we need tax cuts during times of under-employment. In
2001, it said we need tax cuts because of budget surpluses. In
2003, it said we need tax cuts because of budget deficits.
How do you sleep at night?
Under what economic and budget conditions would this
Administration not advocate tax cuts?
Secretary Snow. Well, Senator----
Senator Byrd. I understand we are going to have them every
year now. It is going to be a perennial thing.
Secretary Snow. I think, Senator, that given the level of
the tax bite in the United States, that a good case can be made
for tax rates that are lower than the tax rates that will
result from this round of tax relief.
Senator Byrd. You are not answering my question.
Secretary Snow. Well, I am getting to it, though, Senator.
Senator Byrd. It takes a long time.
Secretary Snow. I don't mean to do that. The tax rates, as
I recall, back in 1992 were about, on the high end, 31 percent;
in 1986, they were 28 percent. I don't see anything wrong with
trying to get tax rates somewhat lower and somewhat flatter.
Obviously, there is a point at which further lowering of taxes
will not serve the long-term interests of the economy, but we
are a long way from that, I think.
Senator Byrd. But in the context of news reports that this
Administration will seek new tax cuts every year, are there any
circumstances, as far as you can envision, in which the
Administration would view tax cuts to be risky or unwise?
Secretary Snow. Well, Senator, what I think the news talked
about was the fact that some of the tax relief that has been
provided will be expiring. Therefore, there will be a need to
go back and address that in the out-years. I think even under
the Senate proposal that is being talked about now, some of
those tax reductions will expire in 2005 and 2006. If they are
good tax policy--and I think they are--then it is important to
come back and make sure they are a permanent part of the Tax
Code.
So I think clearly there is going to be need for further
tax legislation in the years ahead.
Senator Byrd. But not necessarily tax cuts?
Secretary Snow. Well, the legislation that would deal with
those problems would be legislation to avoid tax increases,
because there would be a series of tax increases going into
effect. I am not aware of any proposals that are currently
being contemplated by the Administration for tax cuts. I think
we are focusing all our attention now on getting this package
through the Congress.
Senator Byrd. Temporary tax cuts are being advocated by the
President. It results from using reconciliation. But is there
any level of deficit that this Administration would view as
excessive? The Administration has said there is no particular
line in the sand with regard to how high the Nation's budget
deficits can grow before they would begin to worry the
Administration. The OMB Director reiterated this belief last
January when he said that budget deficits at 3 percent of GDP
were nothing to hyperventilate about. Yet the European Union
not only requires its member states to keep their budget
deficits below 3 percent of GDP, but the European Union
Ministers can punish member states for breaking those deficit
limits. Either the European Union places too much emphasis on
budget deficits, or we place too little.
To what level would the deficit have to grow before the
Administration would begin to hyperventilate? His word. The
person who used that word, he is not necessarily the author of
it, but he is not going to be around very long.
Secretary Snow. Well, Senator, obviously, our view is that
deficits are unwelcome. We don't like deficits. We want to get
back into balance, and the sooner the better.
But these deficits are manageable in the sense that they
are not large relative to our earning power. They are not large
relative to our Gross Domestic Product (GDP). Importantly, they
are coming down with time. They will be around 3 percent this
year, 3.5, coming down over time to well under 1 percent. I
think if the receipts that would come back into the Treasury
were properly accounted for, you would be in balance within
this budget cycle.
Senator Byrd. So you don't see hyperventilation as
something that is imminent?
Secretary Snow. No, I don't, Senator.
Senator Byrd. Too bad. I don't know what my little
granddaughter and great-granddaughters will think about this.
But you and I will probably not be around.
Secretary Snow, in recent weeks, the President has
reiterated his belief that the best way to address the deficit
and move toward a balanced budget is to encourage economic
growth. I believe you said on ``Meet the Press'' that ideal
growth would be 3.5 to 4 percent. But even though the OMB is
projecting economic growth for 2004 at a healthy 3.6 percent,
budget deficits over $300 billion are still projected for that
year.
Assuming the President's policies are enacted into law, how
fast does the economy have to grow, would you say, in order to
finance the President's budget and tax cut proposals?
Secretary Snow. Senator, if we can get the economy up to
the 3.5, 4 percent level, we will put millions of people back
to work. That is, I think, the first priority. We have a fiscal
deficit, but we also have a jobs deficit today. I think the
immediate priority is focusing on that jobs deficit--that
growth deficit.
I am confident as we get this economy rolling again that
the fiscal deficit will come down. It will come down because
there will be more government tax receipts as more workers pay
income taxes, as small businesses expand and pay additional
income taxes, and as corporate profits rise. But we also have
to watch spending. It is a combination of good economic
policies to keep the economy strong that brings in more
government receipts and good, reasonable tight spending
controls. If we do that, Senator, I am convinced that we will
have deficits that are modest, which will recede with time, and
will not cause any adverse effects on interest rates or private
capital formation.
We can never be indifferent to deficits. They really do
count. But the real concern about deficits is that they will
raise interest rates, crowd out private capital, and slow long-
term growth rates. In all honesty, Senator, I don't think that
is a current concern. Our interest rates are at their lowest
level in 40 or 45 years. But I am with you 100 percent on the
need to be extraordinarily watchful of long-term deficits that
get built into the financial fabric of the country. That we
have to avoid at all costs.
DEBT LIMIT
Senator Byrd. My time is past expiring. During your May 11
appearance on ``Meet the Press,'' Tim Russert asked you if the
Congress should vote to lift the debt ceiling before approving
any new tax cuts. And you responded, ``No, no, the two are
really different.'' And yet with a $340 billion to $400 billion
deficit projected for the current fiscal year and an even
higher deficit projected for the next fiscal year, the United
States will have to borrow money to pay for any new tax cuts.
That is a budgetary fact, a kind of very, very plain one.
Unless we raise the debt limits, how can the Treasury
Department borrow the money to pay for the President's proposed
tax cuts?
Secretary Snow. Well, Senator, lifting the debt ceiling is
an immediate and important issue. It is something that I really
urge the Senate to do, and do before the recess because we are
running up against the limits that we have. But my point to Mr.
Russert was that the debt of the United States is the product
of a number of decisions that have been made in prior years
having to do with our entitlement programs, spending programs,
and so on. It is not directly connected with this year's tax
proposal.
Senator Byrd. Finally, if I may just end this line of
questioning, and my time is running out. You said during your
May 11th appearance on ``Meet the Press'' that the recession
would have been a lot deeper, it would have been a lot harsher,
it would have been a lot worse but for those 2001 tax
reductions that the President was behind.
Absent a Dickensian ``Ghost of Christmas Future'' that
visits the Treasury Department in the dead of night and shows
you the future of tax cuts past, how does the Administration
know what would have happened had there been no 2001 tax cuts?
With so many unknown variables to which you refer in an $11
trillion economy, how do we know that those tax cuts had any
real effect at all?
Secretary Snow. Senator, the best answer I can give you is
my own experience in business and seeing where the economy was
heading in the last half of 2000 and in 2001. I will never
forget sitting in my office in Richmond, Virginia, when the
reports of the CSX transportation subsidiaries came in: the
railroad car loadings way down, the barge loadings way down,
the truck loadings way down, ocean container shipping way down,
the logistic business way down. I called the heads of these
businesses and I said, ``There must be something wrong, and we
need to meet and talk about this.'' ``No,'' they said, ``these
are the numbers.'' They were confirmed in August and they were
confirmed in September.
I remember going, Senator Byrd, to a business summit
meeting that the President-elect called with business leaders
and economists and academics in Austin, Texas, in January of
2001. There was a roundtable discussion about the economy and
the outlook, and when it was my turn, I was very
straightforward. I said, ``Mr. President, you are inheriting a
recession, and it is going to be a deep one unless action is
taken soon to deal with it.''
So, Senator, I really do feel that the action that the
Congress took in 2001 headed off what could have been a very
serious, very deep-seated recession.
In fact, the industrial sector fell to 20- or 30-year lows
in terms of output levels during that period. It was a deep,
deep fall-off in economic activity, and the industrial sector
is still working its way through those issues.
I recognize what you are saying. Economics isn't an exact
science, but my own personal experience complements what little
I know about economics to suggest that those 2001 tax
reductions were very important.
Senator Byrd. And helped to lead to gargantuan deficits.
Secretary Snow. Senator, if the economy hadn't begun to
come back as it did, government receipts probably would have
been even lower. Government receipts have really been down from
where they were back at the end of the 1990s. There has been a
dramatic fall-off in government receipts, tied to, I think,
primarily the weakening of the economy.
Senator Byrd. Thank you.
TERRORIST FINANCING
Senator Shelby. Thank you, Senator Byrd.
Mr. Secretary, the Office of Foreign Assets Control (OFAC)
is the Department's lead agency for identifying terrorist
financing and denying terrorist groups access to financial
markets. What efforts have been made to garner the commitment
of other nations to participate in this effort, in other words,
to get a handle on the terrorist groups' access to financial
markets?
Secretary Snow. Senator, we are engaged in extensive
efforts to do just that, led primarily under the broad
direction of David Aufhauser who I mentioned earlier. But we
have a major outreach program with dozens and dozens of
countries with whom we share intelligence, coordinate
information, and work in a coordinated way to try and interdict
these flows. OFAC has done a number of designations of foreign
banks. Once those designations are made, the bank can no longer
have dealings with the United States banking system. We
coordinate those activities with the foreign finance ministries
and enforcement people. There have been a significant amount of
assets seized from bank accounts of people who we suspect of
terrorist activities or supporting terrorist activities.
So it is a major and a full-time effort.
Senator Shelby. The French, are they cooperating?
Secretary Snow. Yes, Senator----
Senator Shelby. And to what extent?
Secretary Snow. We have had discussions with the French
about the need to be part of this. They have committed to using
their official banking system and enforcement authorities to
trace and track the illicit funds that finance terrorism.
Actually, Senator, we have good, broad-based support for
these initiatives.
Senator Shelby. Does that include Cyprus?
Secretary Snow. I would have to check the list.
Senator Shelby. And a lot of the Middle Eastern countries,
including Jordan.
Secretary Snow. Right.
Senator Shelby. Mr. Secretary, a lot has been written about
seized Iraqi funds. You recently called upon all nations, Mr.
Secretary, to join the U.S., and your words were ``find,
freeze, and return Iraqi money for the Iraqi people and their
future.''
Given that Saddam Hussein's wealth has been estimated to be
anywhere between $2 billion and $40 billion, recovering this
money will certainly help in the rebuilding of Iraq. However,
given that a number of countries and private entities around
the world have laid claim to a portion of those assets, if not
all, how is your request to return this money to the Iraqi
people being received overseas?
Secretary Snow. I think it depends a lot on who we are
talking to. But among the G-7, it has been very well received,
and I will submit to you for the record an assessment----
Senator Shelby. We would like that.
Secretary Snow. Yes, I will submit to you our assessment of
the levels of cooperation and the obstacles we are running
into.
Senator Shelby. Obviously, you are trying to marshal the
assets, right?
Secretary Snow. Exactly.
Senator Shelby. So what role are you playing from Treasury
in trying to stabilize the economy there and assist in the
rebuilding of the country? And I will start with the monetary
system.
Secretary Snow. Right. Mr. Chairman, there is a far-
reaching effort underway involving the Treasury Department. We
have a team of people over there right now, headed up by Peter
McPherson, a former Deputy Secretary of Treasury and a former
head of USAID.
Senator Shelby. A very able man.
Secretary Snow. A very able fellow, took a leave of absence
from Michigan State University where he is the president. He
has assembled a good team of people from the Treasury
Department. We have also asked the IMF for assistance on these
monetary and financial issues, and the World Bank to do
assessments of needs as well.
I think the first task is to get a banking system up and
going, a payment system. Mr. McPherson is in regular contact
with us on those efforts: a payment system, a banking system,
and a sound currency.
Senator Shelby. How is your $20 bill program working?
NEW $20 BILL
Secretary Snow. That $20 bill program I think is going to
be a great success. It is going to make counterfeiting a lot
harder. I was pleased to be able to unveil that $20 bill here
with Chairman Greenspan a week or so ago. It got a lot of
attention. It is really going to be an advance in our currency.
Senator Shelby. Are the merchants there accepting it with
open arms in the souks and so forth? That is important.
U.S. CURRENCY CIRCULATION IN IRAQ
Secretary Snow. It is. Mr. Chairman, the U.S. dollar is
playing quite a role in the Iraqi world now. The Saddam dinar,
which we hope can be eliminated soon----
Senator Shelby. Why has it not been eliminated?
Secretary Snow. Well, because there isn't an alternative
currency yet, but I hope it can be eliminated soon. Mr.
McPherson and his team, with local Iraqi finance advisers, are
looking at that question. Ultimately the currency really ought
to be determined by the Iraqi people. But it would be our view
that the sooner they can end the Saddam dinar, the better.
There are also so-called Swiss dinars in circulation that
come from the north.
Senator Shelby. How does that work? Are they denominated or
tied to the Swiss franc or what?
Secretary Snow. No. They took the name because apparently
the person who got the contract was Swiss, although it was a
British company.
Senator Shelby. That prints the money?
Secretary Snow. That prints the money. An English company
got the contract to print the money, but the person who
negotiated it was a Swiss, so they called it a Swiss dinar,
apparently.
We have the Swiss dinars in circulation, and we have the
Saddam dinars, which have depreciated enormously. Their
official exchange rate, if you are a member of the Saddam
family, was something like 5 or 6 or 7 or 8 to the dollar.
Their current market exchange rate is 3,000 to the dollar.
Senator Shelby. But the fact that they are even still
circulating or have some value is interesting, isn't it?
Secretary Snow. Well, as I said, I am not happy about that.
I think the sooner the new currency is put in place, the
better. In the interim, the U.S. dollar is playing an important
role. It is found in lots of shops and is being used quite
readily.
ESTABLISHMENT OF A CENTRAL BANK IN IRAQ
Senator Shelby. Are you going to be involved, directly or
indirectly, as the Treasury Secretary in recommending the
formation of a central bank, an independent central bank for
Iraq?
Secretary Snow. Yes, we will.
Senator Shelby. That will be independent of the political
arena?
Secretary Snow. Yes, yes. In fact, Mr. McPherson and his
team, working with John Taylor, the Under Secretary for
International Affairs, and others in Washington, are giving
close attention to the question of what the new central bank
should look like, what a private set of banking institutions
would look like, what the national accounts should look like,
what the budget should look like, and what the currency should
look like.
But, ultimately, Mr. Chairman, I think those decisions need
to be made by the Iraqi people. In the interim, we can get
these institutions set up and going and, hopefully, create a
good, strong financial foundation for the country going
forward.
Senator Shelby. Would the strong, financial foundation
obviously be predicated on the underlying assets of the country
such as the oil?
Secretary Snow. Yes, it would. I think the management of
the oil operations of Iraq is absolutely critical to their
long-term economic well-being.
Senator Shelby. Mr. Secretary, I know it will take
investment and modernization of the oil fields, which are vast,
huge there, but some people have been talking about how Iraq
could pump 5 or 6 million barrels a day of oil--maybe not yet,
but down the road, after a lot of investment, of course.
Secretary Snow. Right. Exactly. Well, next to Saudi
Arabia----
Senator Shelby. Second largest oil reserves in the world.
Secretary Snow. Second largest oil reserves in the world,
with huge potential.
Senator Shelby. And a relatively small population.
Secretary Snow. Yes. It is a wealthy country if its
resources are managed well.
Senator Shelby. And allocated.
Secretary Snow. And allocated properly.
Senator Shelby. Senator Murray.
ECONOMY
Senator Murray. I don't have any other questions at this
time. I just want to say I was--I don't know if I share your
rosy scenario on the economy. My State is really reeling. We
have lost 70,000 jobs in the last 2 years. Our unemployment is
at over 7 percent. Our State legislature has a $2.7 billion
deficit they don't know how they are going to deal with, and
one out of nine Washingtonians don't have health care today.
And I am not sure this tax cut is going to help too many of the
people I represent. So I would love to say you are right on the
rosy economy scenario that you presented to us, but I tell you,
I hope this Administration is looking west because we are
really struggling.
Secretary Snow. Well, Senator, I don't want to sound too
rosy. I recognize that with our unemployment rate rising, with
so many fewer people working today, we have some serious
economic problems to deal with. But I do think the foundations
have been put in place, with low interest rates, no inflation,
high productivity, and lower costs of production for a pretty
good recovery once demand comes back. I would dearly love to
see those growth numbers get up to those higher levels that I
talked about so that your unemployment rate can come down and
the unemployment rate nationally can come down. The clear fact
is we are way underperforming the potential of this economy.
The consequence of that is lots of people's lives are adversely
affected; lots of people who would have work don't have work.
Senator Murray. I just hope you pay attention to the West
because we are hurting.
Secretary Snow. Thank you. I will do that. Thank you.
Senator Shelby. Senator Byrd.
BYRD AMENDMENT
Senator Byrd. Thank you, Mr. Chairman. And thank you for
being so patient and fair. And thank you, Mr. Secretary and Ms.
Ressel.
Well, Mr. Secretary, you know my concerns about what is
happening in the steel industry. American steel companies have
been devastated by wave after wave of unfairly subsidized and
below-cost foreign steel imports. Just yesterday, I believe it
was, these waves claimed another victim as Weirton Steel filed
Chapter 11 bankruptcy protection.
I hope, as everyone does in the northern panhandle of West
Virginia, that Weirton emerges from bankruptcy in a stronger,
more competitive position. But two of the programs that the
company may rely on to get back on its feet--namely, the
emergency steel loan guarantee program and the Continued
Dumping and Subsidy Offset Act--have been targeted for
elimination by the Administration.
The Administration has sought to eliminate the steel loan
guarantee program, rescinding $97 million in available fund
from fiscal year 2003 and requesting zero dollars for fiscal
year 2004.
Moreover, the Continued Dumping and Subsidy Offset Act,
which I created in 2000, was found to be in non-compliance with
World Trade Organization rules. That ruling by a WTO panel is
shortsighted, wrongheaded, and dumb. When it ruled against the
Byrd amendment, the WTO challenged the right of the United
States Congress to distribute Government funds as the Congress
sees fit.
National unemployment figures for April showed
manufacturing jobs continuing to decline. Factory payrolls have
fallen for 33 consecutive months. Listen to that. Factory
payrolls have fallen for 33 consecutive months. Over 3 years.
Many of those industrial jobs have disappeared forever. We need
to take steps now to protect those jobs that we have left and
to encourage new growth in manufacturing, and steel jobs are at
the core of this effort.
Now, you know my concerns, as I said. When we met in
January, we talked about the steel industry and how it was
important to so many other sectors of this economy. This
Administration continues to advocate policies that would pull
the rug from underneath the steel industry as it works to
restructure again and to regain its market share. It wants to
eliminate the emergency steel loan guarantee program, which I
created. Actually, it is giving me a bad cramp in my leg right
now. It got me out of bed this morning, that cramp in my leg. I
wouldn't be a very good swimmer.
But it wants to eliminate the emergency steel loan
guarantee program. It wants to repeal the Byrd amendment and
exempt product after product from the Section 201 tariffs. It
seems that the only thing that American industrial workers can
count on receiving under this Administration is a pink slip.
Now, here is my question. With regard to the Byrd
amendment, last February the President recommended the repeal
of the continued dumping and subsidy offset--that is the Byrd
amendment--in his fiscal year 2004 budget request. This is the
law with overwhelming bipartisan support--overwhelming
bipartisan support that allows import duties to be distributed
to U.S. producers who are injured by unfair trade to help them
invest in their companies and workers.
On May 6th, the U.S. Trade Representative said in its
statement on the Byrd amendment before a WTO arbitrator,
``Unlike other elements of the budget, the repeal of the Byrd
amendment is not tied to the end of the fiscal year and, in
particular, it is not intended to be included in the
appropriations act.'' This recent statement by the U.S. Trade
Representative is flatly inconsistent with the President's
budget request of February 3.
Now, contrary to its earlier proposal, the Administration
has made a 180-degree turn and declared that the repeal of the
Byrd amendment was never intended to be included in an
appropriations bill.
If the Administration's position is that the Byrd amendment
should not be repealed, why has the Administration not
submitted a budget amendment to the Congress that reverses its
earlier recommendation?
Secretary Snow. Senator, I do not know.
Senator Byrd. That is an honest answer.
Secretary Snow. Yes. But I will seek to get an answer to
that question for you, quickly.
Senator Byrd. Well, it is my understanding that the
Inspector General of the Department of Homeland Security is
completing a report which will show that the U.S. Customs
Service has failed to collect approximately $90 million under
the Byrd amendment. U.S. law requires the Federal Government to
collect those duties, and yet, reportedly, it has failed to
collect $90 million.
Up until a short time ago, that responsibility was part of
your Department. Why has the Customs Service been unable to
comply with these laws enacted to provide legitimate remedies
against unfair trade? Why didn't the Treasury Department pursue
those lost revenues?
Secretary Snow. Senator, I am not really familiar with this
whole issue. I understand that the study is being completed.
Treasury has lost that enforcement responsibility under the
transfers to the Department of Homeland Security. I am not on
top of that issue in a way to be able to give you an informed
answer.
Senator Byrd. Well, the Treasury Department retains control
of many of the key provisions of the Tariff Act of 1930, of
which my amendment is a part. With all respect, you are the
Administration's point man on economic and fiscal policy.
Everyone else has been shown the door. The erosion of the
Nation's manufacturing sector, including steel, is one of the
key elements of our economic weakness. Playing a bureaucratic
shell game is simply unacceptable.
As the Administration's voice on economic policy, would you
tell the committee whether the Administration believes that it
is important to provide support to our manufacturing businesses
through this key initiative?
Secretary Snow. Senator, as you know, I have had a long
involvement with steel and served on the board of one of these
companies, who very much supported your efforts on behalf of
steel, applauded you for doing so. Given that service, I am
told that I need to recuse myself from direct answers to
questions like that. But Ms. Ressel will respond for us.
Teresa? She didn't know that was coming.
Ms. Ressel. I need to apologize. I was working hard on
making sure that we were correct on the last answer, so I need
you to repeat the question. I apologize.
Secretary Snow. Do we support manufacturing in steel?
Ms. Ressel. We have to get back to you. I am sorry. I don't
know.
Senator Shelby. Mr. Secretary, could you do that for the
record?
Secretary Snow. Yes, we will.
Ms. Ressel. We do have an answer to your previous question,
sir, about the uncollected antidumping--the $90 million
question. Basically, the original people who were supposed to
do that audit were the Treasury IG, and now that responsibility
has been transitioned to the Homeland Security IG.
It is our understanding that, for example, in 2002, $48
million of one particular case is under protest. Basically what
we have got is a reconciliation system set up where Treasury's
Inspector General will turn that information over to Clark Kent
Ervin, who is the Acting IG for Homeland. He is doing a
complete reconciliation. We can have those numbers ready for
you within a very short period of time. They are closing that
out.
I don't know that you will ultimately get a complete
reconciliation this year because Customs is saying that they
are not going to continue to do collection until all of the
open issues have been cleared relative to the protests that the
actual importers are eligible to do. That is our understanding
of that one. If you want a briefing or any additional
information, we would be happy to provide that, sir.
Senator Byrd. Very well. Mr. Secretary, the subcommittee
will welcome further responses on this matter, and as you have
indicated, you will have something further to report to the
committee.
Thank you.
Secretary Snow. Yes, we will, Senator.
Senator Byrd. Thank you, Mr. Chairman.
Senator Shelby. Thank you, Senator Byrd.
ADDITIONAL COMMITTEE QUESTIONS
Mr. Secretary, I have a number of questions that I would
like to submit to you for the record dealing with your office,
the Secretary of the Treasury, and we would appreciate that
they be in promptly.
Secretary Snow. We would be happy to respond, Mr. Chairman.
Senator Shelby. Senator Murray, do you have any other
questions?
Senator Murray. No, Mr. Chairman. Thank you.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Richard C. Shelby
DEPARTMENTAL OFFICES
Question. The Inspector General and Tax Administration has
traditionally been a watchdog over the IRS--an agency in need of
constant oversight. The budget proposes to consolidate this office with
the Office of Inspector General (OIG) at the Department of Treasury.
What benefits will be derived from the proposed consolidation and what
will the impact be if the consolidation does not happen?
Answer. The benefit derived by consolidating the Office of the
Inspector General (OIG) and the Inspector General for Tax
Administration (TIGTA) would be a reduction in overall cost of
Inspector General operations. In the post Homeland Security divestiture
environment, Treasury incurs duplicative overhead by maintaining both
offices which are being paid by the taxpayers with little added
benefit. Thus the impact of not consolidating the offices would be the
inefficient use of taxpayer money.
The OIG was established in 1988 and TIGTA was created 10 years
later to provide dedicated independent oversight to the Internal
Revenue Service and related entities. Both offices have the following
responsibilities:
--Conduct and supervise audits and investigations.
--Provide leadership and coordination.
--Promote economy, efficiency, and effectiveness in programs and
operations.
--Prevent and detect fraud and abuse in programs and operations.
--Provide a means for keeping the Secretary and the Congress fully
and currently informed about problems and operations.
Last year, upon the creation of the Department of Homeland Security
(DHS) a significant amount of the OIG's responsibilities and budget was
transferred to DHS and the Department of Justice (DoJ). This coincided
with the transfer of the U.S. Secret Service, the U.S. Customs Service,
and the Federal Law Enforcement Training Center's move to DHS and most
of the bureau of Alcohol, Tobacco and Firearms' move to DoJ.
Since a substantial portion of OIG was transferred to DHS and DoJ
respectively, it makes good business sense to consolidate the balance
of the Office of the Inspector General with the Office of the Inspector
General for Tax Administration, eliminating duplication by creating a
more efficient and effective operation in accordance with the mission
of both offices.
Question. The fiscal year 2003 Treasury bill established a fund for
a Treasury-wide Financial Statement Audits Program. Why are these funds
requested in the Departmental Offices' budget rather than the Inspector
General's budget?
Answer. The funds are in the Departmental Offices budget because
the Inspector General looks to the Department or its bureaus to pay for
financial statement audits performed by contractors. That is, the audit
costs should be by the entity being audited (i.e., the Department and
its bureaus), not by the Inspector General. The Inspector General only
funds the audit work it actually performs; much of the audit work is
performed by contractors.
Prior to fiscal year 2003, audit funding for the appropriated
Treasury bureaus was decentralized and funding needs varied from year
to year depending on who was conducting the audit (i.e., IG, GAO, or a
private firm). This resulted in contracting delays and a fragmented
approach to the overall financial statement audit. For fiscal year
2003, Treasury obtained the centralized funding, which has greatly
alleviated the funding and contracting problems experienced in previous
years.
Centralizing the funding and procurement responsibility for these
audits has streamlined the process, consolidated the audit work with
fewer contractors, enabled greater audit efficiencies, and enhanced the
timeliness and consistency of awarding financial statement audit
contracts throughout the Department. Further, it has eliminated audit
funding uncertainties we previously experienced from year-to-year
caused by the mid-year shifting of audit funding responsibilities from
the General Accounting Office to the Department and from the Office of
Inspector General to the Department's bureaus. These enhancements also
help the Department to maintain its leadership role in accelerated
financial and performance reporting.
Question. The Office of Foreign Assets Control is the Department's
lead agency for identifying terrorist financing and denying terrorist
groups access to financial markets. What efforts have been made to
garner the commitment of other nations to participate in this effort?
Answer. Since September 11, 2001, the Office of Foreign Assets
Control (OFAC) has worked with other nations and the United Nations to
garner their commitment to participate in efforts to identify terrorist
financing and deny terrorist groups and their support networks access
to financial markets and from having dealings with persons in U.N.
member states. Over the last 2 years, OFAC has led or participated in
more than 20 trips, held bi-lateral meetings with delegations from a
dozen countries and representatives from the United Nations and has
responded to more than 100 requests for terrorist financing information
from more than 50 countries.
OFAC's effort to garner international support to combat terrorist
financing has:
--Encouraged several countries, particularly in the Middle East
region, to adopt new measures and/or strengthen existing
legislation to increase regulatory oversight over charities,
other charitable fundraisers and domestic financial
institutions in order to prevent their exploitation by
terrorist fundraisers.
--Laid the groundwork in several countries for the creation of an
OFAC-like administrative sanctions implementing agency and the
adoption of new legal authorities to implement administrative
freeze and blocking orders pursuant to U.N. obligations.
--Increased compliance efforts by international banking authorities
and assisted more than 50 nations with implementing and
maintaining asset freeze orders pursuant to U.N. obligations.
--Negotiated international procedures and guidelines which have been
adopted by the G-7 working group on terrorist financing and the
U.N. 1267 Committee.
--Provided investigative and analytic assistance to countries in
Europe and the Middle East to pursue known supporters of
terrorism and to exploit new leads to identify and isolate
terrorist financiers and financial networks.
--Worked with countries in Europe, Southeast Asia and the Middle
East, including Saudi Arabia, to jointly designate terrorists
and their support networks.
FINCEN
Question. The USA PATRIOT Act requires FinCEN to implement a number
of regulatory requirements.
What is the current status of the implementation of these various
provisions?
Answer. Because the Patriot Act not only requires the issuance of
rules, but also provides new tools for combating new threats as they
arise, and establishes ongoing processes for sharing information, there
is no one terminal point for Patriot activities--rather, full
utilization of the Patriot Act is an ongoing process (i.e., Sections
311, 314, 361). In terms of reports, FinCEN has issued all the required
reports to date; there are reports due in the future relating to
whether there are gaps that need to be filled (i.e., Section 324). In
terms of rules, FinCEN has to complete the issuance of anti-money
laundering program rules, and the final correspondent banking rules.
Question. One of the crucial concepts behind many of these
requirements is that the right people see the right information at the
right time to prevent terrorists from attacking us again. What steps
are you taking to ensure that this is indeed happening and that this
vigilance is sustained over the long haul?
Answer. FinCEN is very actively following trends and patterns in
the movement of illicit funds and publishes advisories and reports to
alert law enforcement and the financial and regulatory communities. In
addition to the requests FinCEN receives from law enforcement for
assistance in researching and analyzing data to support investigations,
it is providing law enforcement with proactive cases. FinCEN also
established a new program under Section 314 of the USA PATRIOT Act that
allows law enforcement to query financial institutions, through FinCEN,
regarding subjects of money laundering or terrorist financing
investigations. This program is providing law enforcement with timely
and valuable information about investigative subjects, as well as
providing opportunities for coordinating investigations. Lastly,
FinCEN's Office of Intelligence Liaison (OIL) was established in late
1999, with the goal to identify, through BSA data, clues or leads for
law enforcement on possible terrorist-related finances and activities.
The analytical products of this office, since its establishment, have
contributed to numerous intelligence and law enforcement efforts both
proactively and in support of investigations already in progress.
INTERNAL REVENUE SERVICE
Question. The Earned Income Tax Compliance effort has experienced
some problems since its inception. What is your suggestion on how to
solve this perennial problem?
Answer. Although the Earned Income Tax Credit (EITC) has been
successful in lifting millions of low-income taxpayers and their
children out of poverty, the EITC program has experienced persistent
noncompliance. The IRS attempts to balance enforcement activities with
education and outreach programs so that only those taxpayers entitled
to the EITC receive it.
The President's Fiscal Year 2004 Budget requested an additional
$100 million to begin a new strategy for improving the EITC program.
The IRS will address potential erroneous claims by identifying cases
that have the highest likelihood of error before they are accepted for
processing and before any EITC benefits are paid. A key part of this
strategy is to begin certifying taxpayers in advance for the EITC.
The IRS recently announced additional details and refinements of
this initiative. The initiative will specifically:
--reduce the backlog of pending EITC examinations to ensure that
eligible taxpayers whose returns are being examined receive
their refunds quickly,
--minimize burden and enhance the quality of communications with
taxpayers by improving the existing audit process,
--encourage eligible taxpayers to claim the EITC by increasing
outreach efforts and making the requirements for claiming the
credit easier to understand,
--ensure fairness by refocusing compliance efforts on taxpayers who
claimed the credit but were ineligible because their income was
too high, and
--pilot a certification effort to substantiate qualifying child
residency eligibility for claimants whose returns are
associated with a high risk for error.
Below is a press release from the Commissioner:
Taxpayers to Receive Advance Child Tax Credit This Summer
IR-2003-68, May 28, 2003
(Revised June 30 to change mailing dates for notices to check
recipients)
Related Fact Sheet: FS-2003-13
Washington.--Beginning the last week of July, eligible taxpayers
who claimed the Child Tax Credit on their 2002 tax returns will
automatically receive an advance payment of the 2003 increase in this
credit, the Treasury Department and Internal Revenue Service announced
today.
Taxpayers will not have to take any action to get this advance
payment of up to $400 per qualifying child. The Treasury Department and
IRS will perform all the calculations and automatically mail a notice
and a check to each eligible taxpayer.
``The only thing the taxpayer needs to do is cash the check,'' said
Mark W. Everson, IRS Commissioner. ``If you qualify, we will send you a
notice. There's no need to call, no need to apply, no need to fill out
another form. The IRS will do all the work. A few days after the
notice, you will get the check.''
The checks--an advance payment of the 2003 increase in the Child
Tax Credit--will be based on the child tax credit claimed on the
taxpayer's 2002 tax return. The Jobs and Growth Tax Relief
Reconciliation Act of 2003 increased the maximum child tax credit for
2003 to $1,000 per child, up from $600 for tax year 2002. The law
further instructed the Treasury Department to provide the difference--
up to $400 per child--as an advance payment to each eligible taxpayer
this summer.
The Treasury Department will issue about 25 million of these checks
this year, beginning with three principal mailings on July 25, Aug. 1
and Aug. 8. Taxpayers who filed returns after April 15--for example,
those with automatic extensions--will receive their advance payments
after the IRS processes their returns. They should not make any change
to their 2002 returns or remittances based on an expectation of an
advance payment check.
The IRS will send notices to taxpayers on July 22, July 29 and Aug.
5, informing them of their advance payment amount. The IRS urges
taxpayers to hold on to these notices for their 2003 tax returns. They
will need to take the advance payment into account when determining the
amount of their child tax credit on the 2003 tax return.
Taxpayers who are not eligible for the advance payment may still
qualify for the increased child tax credit of up to $1,000 when they
file the 2003 tax return next year. For instance, a taxpayer who did
not have a child in 2002, but had one in 2003, would not receive an
advance payment but may qualify for the full $1,000 credit on the 2003
tax return.
More information is available in answers to frequently asked
questions on the IRS website at www.irs.gov.
Question. The IRS is planning to use private debt collectors to
collect billions of dollars owed in taxes. What steps will the IRS take
to oversee private collectors as well as safeguard taxpayers' privacy?
Answer. The IRS would establish an oversight group with
responsibility for managing case referrals, monitoring and evaluating
PCA performance, monitoring interactions with taxpayers, and reviewing
and approving PCA invoices. The oversight group would be required to
monitor a statistically valid number of taxpayer contacts by each PCA
to evaluate taxpayer treatment and adherence to IRS approved
procedures. A manual review of PCA activity on taxpayer accounts would
be performed to ensure compliance with approved IRS procedures and
overall quality of case handling. A full on-site audit of each PCA by
the IRS oversight group would be performed on a regular basis and would
be in addition to ongoing quality-control and taxpayer protection
monitoring.
The PCA would be responsible for ensuring that each employee who
has access to taxpayer account information has completed the
appropriate background investigation and non-disclosure forms. The PCA
would be required to submit verification of the required background
investigation and copies of the non-disclosure forms to the IRS at
least 20 days before the employee is permitted to access taxpayer
information. In addition, the IRS would adopt tracking procedures
developed during the 1996-1997 pilot program to ensure that no PCA
employee would be granted access to the IRS work site or taxpayer data
until he/she successfully completed a satisfactory background
determination. These procedures were very successful during the pilot.
The IRS' oversight of PCAs would be similar in many respects to the
IRS' oversight of its own employees. For example, the IRS audit system
logs for indications of improper accesses to taxpayer information. The
IRS also performs oversight of employee work for quality and
appropriateness of taxpayer interactions.
PCAs would be required to provide a large amount of information to
the IRS, as well as access to various systems, to facilitate IRS
oversight. This would include:
--detailed Operational Management Information Systems (MIS) reports,
--telephone Service Level reports,
--audits of employee access to IRS taxpayer data,
--access to PCA collection system for auditing purposes,
--remote telephone monitoring access to authorized IRS personnel,
--PCA employee tracking information,
--PCA employee quality review monitoring evaluations,
--PCA Operational Plans, and
--PCA Business Continuation Plans.
To make certain the IRS promptly hears, evaluates and addresses
taxpayer complaints, a PCA would be required to provide to taxpayers,
orally and in writing, information on how to report a complaint with
the IRS. Any complaint received by the IRS from a taxpayer would
immediately be provided to the PCA. If a PCA were to receive a
complaint directly from the taxpayer, the PCA would be required to
immediately forward the complaint to the IRS.
Upon receipt of a complaint from the IRS or directly from a
taxpayer, a PCA would be required to immediately cease collection
activity on the account in question and provide to the IRS, by the
close of business on the following business day, a copy of its records
on the account and any other information relevant to the complaint. The
PCA would not be permitted to resume collection activity on the account
until IRS resolved the problem and provided the PCA written
authorization to resume work. Failure by the PCA to cease collection
activity on the account would result in IRS recalling the account from
the PCA and, if appropriate, the termination of the PCA's contract.
A PCA also would be required to investigate the complaint and
provide a complete report to the IRS within 10 business days of
receiving the complaint. The report would include a description of all
actions taken to resolve the situation and steps put in place to ensure
there are no future occurrences of similar situations.
If a complaint is validated, the PCA would be required to remove
the offending employee from the IRS account and take all necessary
steps to ensure the employee no longer has any access to taxpayer
information. In addition, the PCA's bonus and inventory would be
reduced, and the PCA would be subject to a penalty. The IRS could
choose to suspend all contract activity for the PCA either permanently
or until the IRS has determined, at its discretion, that the PCA had
taken appropriate corrective actions to prevent further complaints.\1\
The IRS' determination that a complaint was valid would not be subject
to review.
---------------------------------------------------------------------------
\1\ In determining whether to suspend a contract, the IRS would
consider the severity and frequency of valid complaints for a PCA
(whether related to one or more employees).
---------------------------------------------------------------------------
If a potential statutory violation is identified, the IRS also
would notify the Treasury Inspector General for Tax Administration
(TIGTA). TIGTA may investigate the complaint, depending on the
circumstances and seriousness of the complaint. If TIGTA initiates a
formal investigation of the complaint, the PCA would be required to
cooperate fully with the investigation and coordinate its own
management efforts with the IRS and TIGTA. TIGTA would provide a report
of its investigation to the IRS Contracting Officer after concluding
the investigation.
Question. A Treasury Inspector General for Tax Administration
report states that IRS deposited some tax refunds into unauthorized
bank accounts.
Explain how this mistake could have happened.
Answer. Several factors contributed to the control weaknesses we
identified.
--Instructions for completing the United States Individual Income Tax
Return (Form 1040) do not require taxpayers to take any
preventive steps.--Specifically, the instructions do not
require taxpayers to void the direct deposit fields if they do
not use the fields (e.g., lining through the direct deposit
fields on the tax return rather than leaving them blank) to
ensure the fields cannot be manipulated subsequent to the
filing of the tax return. Furthermore, IRS reports indicate
that approximately 48 percent of paper filed tax returns are
prepared on a computer using tax preparation software packages.
When these tax returns are printed, the direct deposit fields
are left blank for those taxpayers who elect to receive a paper
check tax refund. As with the hand-written paper Forms 1040,
the direct deposit fields on these tax returns can be altered.
--Tax return processing controls are inadequate.--There are no
controls in place to minimize the risk of, or identify
potential instances of, employee impropriety via direct deposit
in the areas that receive and open tax returns, review the tax
returns for completeness, and input the information from tax
returns into IRS computers.
--Procedures do not provide IRS employees with sufficient guidance.--
Procedures were not developed and distributed to those
employees who work in the areas that receive and open tax
returns, review the tax returns for completeness, and input the
information from tax returns into IRS computers informing them
of the need to identify and refer cases with potentially
unauthorized direct deposits to the TIGTA Office of
Investigations.
--When working refund inquiries, IRS employees did not consider the
possibility of this type of employee impropriety.--Employees in
those functions that assist taxpayers who do not receive their
refunds were not required to consider the possibility of
employee impropriety when evaluating tax refund inquiries that
involve direct deposits.
Question. How many checks were deposited into these unauthorized
accounts?
Answer. TIGTA has identified one case to date whereby an employee
altered paper filed tax returns to divert, via direct deposit to
personal bank accounts, approximately $32,600 in tax refunds from
multiple taxpayers for 2 tax years. The tax refunds stolen ranged from
$2,252 to $8,133.
This employee worked at a Submission Processing Site. From on or
about February 28, 2000, to and including April 28, 2000, and again
from on or about February 20, 2001, to and including April 30, 2001,
this employee altered tax returns to include direct deposit account
information that was not requested or authorized by the taxpayers. The
purpose of the alterations was to divert the taxpayers' refunds to bank
accounts belonging to and controlled by the employee.
The employee was successfully prosecuted.
Question. What steps has the IRS taken to make sure this does not
happen again?
Answer. TIGTA alerted IRS executives on June 25, 2002, to the
control weaknesses in the processing of paper filed tax returns that
provide opportunities for tax refunds claimed on paper filed tax
returns to be directly deposited to bank accounts that were not
authorized by the taxpayers. As a result of this alert, IRS management
added this risk as a reportable condition to the tax processing Annual
Assurance Process memorandum. In addition, IRS management implemented a
number of corrective actions including developing and issuing guidance
in response to audit recommendations made during the course of our
review.
IRS management agreed with the recommendations presented in our
report and is planning to take corrective action. Specifically, the
2003 instructions for completing Form 1040 will be changed to tell
taxpayers to line through the direct deposit fields on the tax return
if they are not requesting a direct deposit of a refund check. In
addition, Submission Processing procedures will be changed to instruct
Code and Edit function employees to line through this section if a
taxpayer fails to follow the instructions. Also, the IRS will contact
the software developers and request that they modify their programs so
that the fields do not appear or cannot be altered if a taxpayer wishes
to receive a paper refund check. These changes will be effective for
Tax Year 2003.
Question. The IRS has an obligation under Title 31 (i.e.,
compliance and enforcement of non-bank financial institutions). Is the
IRS adequately funded for its Title 31 functions and operations and the
critical support that the Detroit Computing Center provides to FinCEN?
Answer. The Small Business/Self-Employed (SB/SE) operating division
of IRS is responsible for the non-bank financial institution (NBFI)
compliance examinations for Title 31. In fiscal year 2003, SB/SE
expanded the Anti-Money Laundering (AML) program to include over 30 AML
groups across the country. Significant training resources were expended
to ensure that the newly reassigned Revenue Agents (RAs) were properly
trained to conduct the Title 31 compliance examinations and to refer
potential criminal cases to IRS-Criminal Investigation, if warranted.
IRS efforts to incorporate increased compliance responsibility due to
the numerous regulations prompted by the USA Patriot Act more than
doubled the number of NBFI compliance examinations conducted during
fiscal year 2003. However, the Achieving Balanced Levels of Enforcement
(ABLE) initiative under the Fiscal Year 2004 Budget Submission, if
funded, would allow IRS to increase Title 31 compliance examination
coverage and enforcement responsibilities. This initiative would
provide additional Revenue Agents to implement selected provisions,
i.e., section 352, of the USA PATRIOT Act and to expand overall Title
31 compliance examination coverage given the increasing focus on money
laundering within the related non-bank financial institutions.
The Business Systems Development (BSD) staff at the Detroit
Computing Center (DCC) performs programming and maintenance for the
Currency and Banking Retrieval System (CBRS). CBRS is a large database,
encompassing all Bank Secrecy Act (BSA) forms, the CBRS query system,
sub-systems, and various other entities. There is an overall need to
retool the CBRS to provide flexibility to meet the increasing complex
research and data analysis needs of law enforcement. Treasury, FinCEN,
and IRS are in discussion on the best approaches to this modernization.
Regardless of the future retooling, IRS must keep pace with the new
regulations issued under the USA PATRIOT Act. Form revisions and new
forms required by the USA PATRIOT Act must be added to the current
database for immediate use. These changes may require changes to the
magnetic or electronic systems or building new systems to handle the
additional volume.
SUBCOMMITEE RECESS
Senator Shelby. Mr. Secretary, we appreciate your
appearance here today. We know you are busy, and we appreciate
your candor with the committee and look forward to working with
you in the future.
Secretary Snow. Thank you very much.
Senator Shelby. Our meeting is in recess.
[Whereupon, at 12:23 p.m., Tuesday, May 20, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
----------
THURSDAY, MAY 22, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:46 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray presiding.
Present: Senators Campbell, DeWine, and Murray.
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
STATEMENT OF JEFFREY W. RUNGE, M.D., ADMINISTRATOR
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning. With the concurrence of the
Chair, I am going to open up this committee hearing this
morning.
Welcome to all our guests, and I will do my opening
statement.
First of all, I want to commend our Chairman, who I
understand will be here shortly, for once again holding a very
special hearing to focus on our highway safety challenges. I
hope we will call this hearing every year to continue to
aggressively monitor the progress of the Department of
Transportation in reducing the number of accidents and
fatalities on our highways.
Unfortunately, the news since our last hearing on this
topic has not been good. The latest data shows that for
calendar year 2002 at least 42,850 people died on our Nation's
highways. That is the highest number since 1990 and it
represents an increase in the number of fatalities for the
fourth successive year.
Almost 18,000 of these fatalities had their root cause in
drunk driving. That is an increase of 3 percent from just last
year and marks the third year in a row of increases in alcohol-
related highway deaths. These statistics show that the
Department of Transportation has missed its stated performance
goal for highway safety, a goal that it testified to in last
year's hearing.
I think that all of us on this panel will agree that this
record is unacceptable and must be reversed. We know what is
required to reduce death on our highways. We know what law
enforcement methods work and we know what works to change
driver behavior. What we do not know is whether we, as a
Nation, have the will to force citizens to stop driving
aggressively and to stop driving drunk. And we do not know yet
if the Federal Government has the will to commit the necessary
resources to change that deadly behavior.
When the lives of Americans are threatened by a danger we
take action. We did it after September 11th by dramatically
improving airport security. Drunk and aggressive driving poses
another threat to all Americans and it is one where we can make
a real difference if we are willing to make a commitment.
Each month more than 3,000 people die on our highways. That
is an astounding figure and we can reduce it if we make a
commitment. I would like to see the same commitment to highway
safety as we put on airport safety because we can make a
difference and save lives.
Earlier this week the Bush Administration unveiled its
``SAFETEA'' reauthorization proposal. The administration claims
the bill will double the amount of money spent on safety in
comparison to the 6-year period covered by the TEA-21 law.
However, a review of the details of the administration's
proposal reveals that roughly half of this funding is committed
to efforts to construct safer highways. And while the
construction of safer highways unquestionably saves lives,
there does not appear to be anywhere near that level of growth
committed towards programs designed to change driver behavior.
Last week, I participated with Mothers Against Drunk
Driving in the commemoration of the 15th anniversary of the
worst drunk driving accident in our history. A drunk driver
struck a school bus, killing 24 schoolchildren. I met with a
few of the parents of those victims as well as a student who
survived that crash. I am sorry the entire subcommittee could
not participate in that event. I think it would have served as
a stark reminder to all of us that each day roughly 49
individuals die as a result of drunk driving in this country.
Given these facts, I am concerned that the President's
transportation budget does not adequately address the challenge
that we face. For the second year in a row the budget proposes
to cut funding for the impaired driving program in NHTSA's
operations budget. Together, the Chairman and I served to
increase rather than decrease funding for this program in last
year's appropriations bill, and I hope that we will do the same
again this year.
Also, while the administration is proposing a new $50
million initiative to reduce drunk driving in those States with
the worst record, the legislation eliminates $150 million in
existing programs that are targeted on drunk driving.
Moreover, the administration's new drunk driving grant
program gives little direction to the States on how
specifically these funds ought to be spent. Recently, the GAO
reported that NHTSA has not required much by way of
accountability on the part of States in using Federal funds to
actually advance highway safety. I think we need to be very
suspicious of initiatives that seek to attack the drunk driving
problem by sharing revenue with the States with no strings
attached.
I must also point out that the President's budget, for the
second year in a row, eliminates the funding for the targeted
paid advertising initiatives that this committee championed.
One of those initiatives, the ``Click It or Ticket'' program,
is targeted on improving seatbelt use. Last year, we started
another paid media initiative entitled ``You Drink, You Drive,
You Lose''. Both of these initiatives are eliminated in the
President's budget.
I hope here again that we can work together with the other
members of the subcommittee to continue our leadership in this
area whether the administration wants to join us or not.
And finally, I have to say that I am very pleased that
Annette Sandberg, our new Federal Motor Carrier Safety
Administrator, is here with us today. She and I have worked
well together in the past and I look forward to working with
you again.
The safety challenges in the motor carrier industry are no
different than they are with the average driver. We need to
make sure that truck drivers buckle up, drive safely, and drive
responsibly. Ms. Sandberg's experience as the former chief of
Washington State's Highway Patrol makes her uniquely qualified
to lead the Federal Motor Carrier Safety Administration.
At this time, I will turn it over to Senator Campbell for
an opening statement. And I just would let you know that I have
an amendment up on the floor that I am managing right now. I
have to leave and hope to come back. I do have questions that I
will submit for the record if I get caught and cannot return.
PREPARED STATEMENT
But I do think this is a critical hearing. I think the
topic of this discussion is absolutely important and I want to
work with all of you to make sure that we address these
important safety issues.
[The statement follows:]
Prepared Statement of Senator Patty Murray
I commend you, Mr. Chairman for once again holding a special
hearing to focus on our highway safety challenges. I hope we will call
this hearing every year to continue to aggressively monitor the
progress of the Department of Transportation in reducing the number of
accidents and fatalities on our highways.
Unfortunately the news since our last hearing on this topic has not
been good. The latest data indicate that for calendar year 2002, at
least 42,850 people died on our Nation's highways. That is the highest
number since 1990, and it represents an increase in the number of
fatalities for the fourth successive year. Almost 18,000 of these
fatalities had their root cause in drunk driving. That's an increase of
3 percent from just last year and marks the third year in a row of
increases in alcohol-related highway deaths. These statistics bear show
that the Department of Transportation has missed its stated performance
goal for highway safety, a goal that it testified to in last year's
hearing. I think that all of us on this panel would all agree that this
record is unacceptable, and must be reversed.
We know what is required to reduce death on our highways. We know
what law enforcement methods work, and what works to change driver
behavior. What we don't know is whether we as a Nation have the will to
force citizens to stop driving aggressively and to stop driving drunk.
And we don't yet know if the Federal Government has the will to commit
the necessary resources to change that deadly behavior.
When the lives of Americans are threatened by a danger, we take
action. We did it after the tragic events of September 11th by
dramatically improving airport security. Drunk and aggressive driving
poses another threat to all Americans, and it's one where we can make a
real difference if we are willing to make a commitment. Each month,
more than 3,000 people die on our highways. That's an astounding
figure, and we can reduce it if we make a commitment. I'd like to see
the same commitment on highway safety as we've put on airport safety,
because we can make a difference and save lives.
Earlier this week, the Bush Administration unveiled its so-called
``SAFETEA'' Reauthorization proposal. The Administration claims the
bill will double the amount of money spent on safety in comparison to
the 6-year period covered by the TEA-21 law. However, a review of the
details of the Administration's proposal reveals that roughly half of
this funding is committed to efforts to construct safer highways. While
the construction of safer highways unquestionably saves lives, there
doesn't appear to be anywhere near that level of growth committed
toward programs designed to change driver behavior.
Last week, I participated with Mothers Against Drunk Driving in the
commemoration of the fifteenth anniversary of the worst drunk driving
accident in our history. A drunk driver struck a school bus, killing 24
schoolchildren. I met with the parents of the victims as well as a
student that survived the crash. I am sorry the entire Subcommittee
could not participate in that event. I think it would have served as a
stark reminder to all of us that each day roughly 49 individuals will
die as a result of drunk driving in this country.
Given these facts, I'm concerned that President's transportation
budget does not adequately address the challenge we face. For the
second year in a row, the budget proposes to cut funding for the
impaired driving program in NHTSA's operation's budget. Together Mr.
Chairman, you and I served to increase rather than decrease funding for
this program in last year's Appropriations Bill. I hope we will do the
same again this year.
Also, while the Administration is proposing a new $50 million
initiative to reduce drunk driving in those States with the worst
record, the legislation eliminates $150 million in existing programs
that are targeted on drunk driving. Moreover, the Administration's new
drunk driving grant program gives little direction to the States on how
specifically these funds ought to be spent.
Recently the GAO reported that NHTSA has not required much by way
of accountability on the part of States in using Federal funds to
actually advance highway safety. I think we need to be very suspicious
of initiatives that seek to attack the drunk-driving problem by sharing
revenue with the States with no strings attached.
I must also point out that the President's budget, for the second
year in a row, eliminates the funding for the targeted paid advertising
initiatives that this Committee championed. One of those initiative--
the ``Click It Or Ticket'' program--is targeted on improving seatbelt
use. Last year, we started another paid media initiative entitled ``You
Drink--You Drive--You Lose.'' Both of these initiatives are eliminated
in the President's budget. I hope here again we can work together with
the other members of the Subcommittee to continue our leadership in
this area whether the Administration wants to join us or not.
Finally, I am pleased that Annette Sandberg, our new Federal Motor
Carrier Safety Administrator, is here with us today. The safety
challenges in the motor carrier industry are no different than they are
with the average driver. We need to make sure that truck drivers buckle
up, drive safely and drive responsibly. Ms. Sandberg's experience as
the former Chief of Washington State's Highway Patrol makes her
uniquely qualified to lead the motor carrier safety agency.
Thank you Mr. Chairman.
PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Murray. Senator Shelby has submitted a statement
which he would like included for the record.
[The statement follows:]
Prepared Statement of Senator Richard C. Shelby
Good Morning. The Subcommittee will come to order. I want to thank
each of the witnesses for being here today to discuss fiscal year 2004
highway safety initiatives. As we approach Memorial Day, one of the
most dangerous weekends for highway travel, I cannot think of a better
time to discuss what I believe is a very important, yet all too often
overlooked issue.
Last year, 43,000 people died on our Nation's highways and roughly
18,000 of the deaths were in alcohol-related crashes. Just as troubling
is the fact that 4.5 million people visit the emergency room each year
as a result of a motor vehicle accident. As the leading cause of death
in the United States for Americans ages 1 to 35, I believe that this
problem has reached epidemic proportions.
Much like the medical community treats cancer or heart disease, we
need to develop a plan to research and enact effective, data driven
programs to reduce the number of highway fatalities.
I am struck, however, by the lack of scientific method or
comprehensive rational approach to combating drunk and drugged driving,
to increasing seatbelt use in those demographics that under-perform the
national average, or to changing dangerous behavior where we can
identify it and isolate it.
Dr. Runge, as a physician you can not possibly subscribe to doing
the same thing for an extended period of time if the patient did not
improve--you would discontinue treatments that didn't work, prescribe
treatments that did work, and try new treatments for conditions that
you could identify and diagnose. That is all I am asking you to do
here--identify, diagnose, and treat. We must start saving lives.
This year, the Department of Transportation has declared safety to
be its No. 1 priority for its current budget request and for its
reauthorization proposal, SAFETEA as well. Highway deaths have
increased every year for the past 4 years and alcohol-related deaths
increased for the third consecutive year, and I agree that there is no
greater priority than reversing these alarming trends.
When I look at this budget proposal, I see no new initiatives that
help us improve our poor highway safety record. The data tells me that
what we are doing is not working, and it is preposterous to believe
that we can continue to do the same thing each year and expect a
different result. Too many lives are lost while many States, with
NHTSA's approval, use their safety grants to use bobble-head dolls, key
chains and air fresheners to get the message out without any results.
It is beyond me how these trinkets are increasing seat belt usage or
deterring impaired driving. I support State flexibility, but trinkets
don't save lives. We must change our course if we expect to reduce the
carnage on our Nation's highways.
The Administration's goal is to reach a 78 percent usage rate by
the end of 2003. However, the budget proposes nothing specific to
further increase usage rates and despite the remarkable success of the
Click It or Ticket mobilizations, NHTSA has never requested specific
funding for the program. It may not be a silver bullet, but I am not
aware of another program that is as effective as these campaigns in
increasing seat belt usage. To me, that goal rings hollow unless the
budget justification outlines the steps we must take to achieve a 78
percent usage rate. This budget does not meet that test.
On the other hand, we are making modest improvement in large truck
crashes which continued to decline this year, but much more needs to be
done. I think that the data derived from the large truck crash
causation study will provide an important blueprint to guide FMCSA in
the future.
The Federal Motor Carrier Safety Administration was granted
additional authorities with the enactment of the Motor Carrier Safety
Improvement Act. FMCSA has a major new management challenge at hand to
fully implement the new entrant program, and the first year will be the
most difficult in identifying the riskiest operators and monitoring
their safety records. I urge FMCSA to work with stakeholders and State
enforcement authorities to coordinate and implement the new entrant
program. I also encourage you to look into the possibility of
designating a Federal tiger team to augment the efforts of the States
to investigate the carriers who pose the greatest risks.
Again, I will say that I am disappointed by what I perceive to be a
lack of innovative and creative thinking to allow our government to
improve highway safety numbers. I appreciate that the responsibility to
make our highways safer does not rest solely with your two agencies. In
fact, everyone who gets behind the wheel shares some accountability.
Nevertheless, it is important for all agencies within the
Department to work together to identify strategies for improvement and
implement programs that are effective. If programs have reached a
plateau or outlived their usefulness, then we must create and implement
new approaches. We cannot sit idly by and hope that highway safety will
spontaneously improve.
I look forward to hearing the testimony and am hopeful you will
provide additional insight that will prove more promising than what I
have seen so far.
Senator Murray. Senator Campbell?
STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL
Senator Campbell [presiding.] Thank you, Madame Chairman.
I will submit my opening statement for the record and just
associate myself with your comments.
It is rather ironic that--maybe ironic is not even the
proper word--but we have killed more people on American
highways than we did in Iraq during the same time frame we have
been involved in that engagement, and people do not seem to get
excited. When one serviceman tragically loses his life in Iraq,
we see it on the headlines of every newspaper in America.
During that same time frame, as I mentioned, in Iraq, we have
lost so many Americans.
I know that we are trying to focus at the State and Federal
level on trying to improve devices in the car. We have done it
with seatbelts. We have done it with airbags and a number of
other things. We are certainly trying, by the highway bills we
have passed and the appropriations, to improve the surfaces and
the conditions on which people drive and that is great. But I
think that we are really not doing as good a job as we could
on, as Senator Murray said, on changing the behavior of
drivers.
I know some States are taking on, as an example, the use of
cellphones and other distractions that have proven to be
distracting to a point of increased accidents because of their
use. And I know we have dealt with alcohol-related deaths a
great deal. And we have done it, I think, an awful lot through
the penalty side of the equation. To me we are not doing enough
on the side of the equation that requires better training and
better education to change that behavior.
So I have about three or four other questions I would also
like to ask, but will yield to Senator DeWine if he has an
opening statement and then we will go ahead and take testimony.
Senator DeWine. I have no opening statement. I will have
questions.
Senator Campbell. We welcome Dr. Jeffrey Runge, the
Administrator of the National Highway Traffic Safety
Administration, Ms. Annette Sandberg, who I understand used to
be a State Patrolwoman and I was very delighted to hear that. I
am sure she brings a great deal of on-the-ground experience to
her job as the Acting Administrator of the Federal Motor
Carriers Safety Administration. Ms. Wendy Hamilton, the
President of Mothers Against Drunk Driving. And finally, to Mr.
Chuck Hurley, the Vice President of the National Safety Council
and Executive Director of the Airbag and Seatbelt Safety
Campaign.
Why don't we just start in that range. If Dr. Runge would
like to start. We will take the comments from all of you before
we ask some questions.
STATEMENT OF JEFFREY W. RUNGE, M.D.
Dr. Runge. Senator Campbell, Senator DeWine, thank you very
much for a chance to appear this morning, along with my
colleagues from the FMCSA and MADD and the National Safety
Council.
This group has spent many hours collaborating on ways to
improve highway safety over the years. The fiscal year 2004
budget request is intended to build on successes we have had in
the past, as well as address growing national safety
priorities.
Over the last 35 years, the fatality rate has been reduced
on our Nation's highways from 5.5 fatalities per 100 million
vehicle miles traveled (VMT) to its present rate of 1.5 per
million VMT. This represents significant progress.
Our programs support Secretary Mineta's departmental goal
to reduce this number to 1.0 by 2008. We have an interim target
for 2004 of 1.38 fatalities per 100 million VMT. This will be a
very challenging target, based on the current trends.
In order to reach these targets, we need the full
cooperation of our sister agencies in the administration, of
Congress, of State legislatures, and indeed, the will of the
Nation.
Under our reauthorization bill, we will use our
appropriated grant funds to encourage States to use funds where
they can be most effective, as States must share in the
accountability with us.
Our proposed fiscal year 2004 budget of $665 million is
performance-based, with clear goals and effectiveness measures,
and it emphasizes our five priorities: increasing safety belt
use, decreasing impaired driving, vehicle rollover, vehicle
compatibility, and traffic records and data improvement. I will
talk briefly about each priority, but they are interrelated and
their solutions, in many ways, are common.
Safety belt use is our most effective tool in reducing
death and injury on the highways. It cuts the risk of death in
a crash in half. But you have to wear it. The good news is that
belt use reached 75 percent last year, which is a record. But
the bad news is that 25 percent of Americans involved in a
motor vehicle crash who did not buckle their safety belts
resulted in 6,800 preventable deaths and 170,000 hospitalizable
injuries. This failure to wear seatbelts cost Americans $20
billion, mostly in medical costs and lost productivity.
Our national target for next year is 79 percent belt use.
Reaching that would save 1,000 lives a year and prevent more
than 28,000 injuries. If we reach a 90 percent usage, we will
see 4,000 more lives saved every year. This is not a dream.
More than 90 percent belt use has been achieved in California,
Washington, Hawaii, and Puerto Rico. We know what is required
for States to achieve these high levels--primary belt laws,
strict enforcement, public education, using paid media and
earned media, and our high-profile law-enforcement programs,
such as ``Click It or Ticket''.
We conducted a highly effective ``Click It or Ticket''
program in eight southeastern States in 2001. In 2002, we
conducted a similar campaign in 30 States, involving media
saturation and highly visible enforcement. In the 10 States
that completely adopted our model, belt use increased an
average of 9 percentage points, with Vermont experiencing a 19
percentage point increase and West Virginia a 15 percentage
point increase.
We are now in the middle of our 2003 ``Click It or Ticket''
national campaign. With the help of this committee, we have
national ``Click It or Ticket'' advertising going on as we
speak. This year, 43 States, D.C., and Puerto Rico chose to
join the campaign.
But for high visibility enforcement campaigns to work
fully, States must have standard safety belt laws. But only 18
currently have them. In fiscal year 2004, NHTSA's budget
proposes a new, primary safety belt incentive grant program
that we expect to result in more States enacting primary belt
laws.
Regarding impaired driving, preliminary data for 2002 show
an estimated 17,970 people dying in alcohol-related crashes,
which is 42 percent of total traffic deaths. Alcohol traffic
deaths are down 25 percent since 1988, but are 3 percent higher
than in 2001. Our target for 2004 is to reduce the rate of
alcohol traffic deaths to 0.53 per 100 million VMT from our
0.64 that we experienced last year.
This will not be done by doing business as usual. We need
to focus resources on where they are most needed, encourage
States that are doing a good job to keep it up, and to help
those States that are not to begin to do a good job.
So, in addition to focusing highly visible law enforcement
campaigns in 2004, we are proposing a grant program that will
provide additional resources to those States that have
particularly severe impaired driving problems.
Rollovers account for less than 5 percent of all vehicle
crashes, but one-third of vehicle fatalities. In 2002, 10,000
people died in the United States in rollover crashes, up nearly
5 percent from the previous year. Light trucks, including SUVs
and pickups, are most at risk. We began rating vehicles in 2001
for their likelihood of rollover, which correlates closely with
experience in real world crashes. The National Academy of
Sciences recently evaluated our rollover ratings and found them
valuable and accurate, but reported that ratings could be
better if we evaluated vehicles in a dynamic rollover test that
measures performance in emergency steering. NHTSA's fiscal year
2004 budget proposes to implement that change.
The U.S. fleet has changed dramatically in the last 20
years, producing mismatches between trucks and cars, and while
light trucks and vans account for 38 percent of all registered
vehicles, they are involved in about half of all two-vehicle
crashes involving passenger cars. About 80 percent of the
deaths occur in passenger cars. Since light trucks are half of
all new vehicle sales today, we cannot delay action to address
this problem.
Regarding traffic records, our budget request includes $10
million to enable us to update NHTSA's crash causation data,
last generated in the 1970's. A lot has changed since then--
vehicles, traffic patterns, numbers and types of vehicles, on
board technologies, and driver demographics. Therefore, we are
requesting support for a new traffic records and data
improvement program in the States that will provide money where
it is needed to support State traffic records.
My final point, we are proposing to restructure our highway
safety grants to make the program simpler, smarter, and more
effective. We are simplifying the grant delivery system by
reducing the number of programs and increasing States'
flexibility to use the grant funds.
PREPARED STATEMENT
Mr. Chairman, this concludes my statement. In closing, I
would like to thank the committee for its support of our
programs in the past. I look forward to working with you in the
future.
Senator Campbell. Thank you.
[The statement follows:]
Prepared Statement of Jeffrey W. Runge, M.D.
Mr. Chairman and members of the Committee: I welcome the
opportunity to appear before you to discuss our country's priority
highway and motor vehicle safety issues that are administered by the
National Highway Traffic Safety Administration (NHTSA). My staff and I
look forward to working with this committee in addressing these issues
of great national importance. Today I am pleased to appear with my
fellow highway safety colleagues.
In these uncertain times, the American public is looking to the
highest levels of government for assurance of its safety. The President
has pledged that the safety and security of our citizens is this
Nation's highest priority. To that end, the Secretary of Transportation
has established transportation safety as the Department's number one
priority. NHTSA is pledged to solving the highway safety issues
confronting this Nation.
NHTSA's fiscal year 2004 budget request of $665 million will help
us build on past successes to address highway safety. The paramount
highway safety goal within the Department is to reduce the fatality
rate on our Nation's roadways to no more than 1.0 fatality for every
100 million vehicle miles traveled (VMT) by 2008. This is not just a
NHTSA goal; it is a goal of the entire Department of Transportation.
Our fiscal year 2004 budget request reflects the resources NHTSA needs
if we are to attain this goal, along with the help of our DOT
colleagues, the States, and the many non-Governmental organizations
that are partners in this effort.
Motor vehicle crashes are responsible for 95 percent of all
transportation-related deaths and 99 percent of all transportation-
related injuries. They are the leading cause of death for Americans
ages 2-33. The total number of highway fatalities has been increasing
slightly since 1998, while the rate per vehicle miles traveled has
decreased. Preliminary estimates for 2002 indicate that an estimated
42,850 people were killed on America's roads and highways, up 1.7
percent from 2001. The fatality rate per 100 million vehicle miles
traveled (VMT) remained unchanged at 1.51, according to these
estimates. Collectively, we have much work to do since the Department
has established a performance goal of no more than 1.38 fatalities per
100 million VMT by the end of fiscal year 2004.
Traffic injuries in police-reported crashes decreased by four
percent in 2002. This is excellent news. But we still are faced with
the overwhelming fact that, during that same year, nearly 3 million
people were injured in these crashes. The average cost for a critically
injured survivor is estimated at $1.1 million over a lifetime. This
figure does not even begin to reflect the physical and psychological
suffering of the victims and their families.
Traffic crashes are not only a grave public health problem for our
Nation, but also a significant economic problem. Traffic crashes cost
our economy $230.6 billion in 2000, or 2.3 percent of the U.S. gross
domestic product. This translates to an average of $820 for every
person living in the United States. Included in this figure is $81
billion in lost productivity, $32.6 billion in medical expenses, and
$59 billion in property damage. If safety is our number one priority,
our Nation must become more aware of the deaths of nearly 43,000
Americans, the cost of these deaths, and the solutions. Given increased
mobility estimates and the likely increase in miles traveled, a failure
to improve the fatality rate will result in more than 50,000 Americans
killed annually by 2008.
Consequently, our fiscal year 2004 budget request of $665 million
is a performance-based budget with clear goals and measures. In
addition, the budget is established around two major performance-based
programs: Vehicle Safety and Traffic Injury Control. Program budgets
are grouped under their corresponding goals for more efficient use of
resources and more accurate performance measurement in meeting each
goal. The budget includes measurable performance targets and outputs
that clearly demonstrate not only how, but also how well, the budgetary
resources are expended.
Before discussing the highlights of our program, I want to describe
briefly the restructuring we are proposing for highway safety grants.
The fiscal year 2004 budget consolidates all highway traffic safety
grant resources provided by TEA-21 ($447 million) within NHTSA. This
includes $222 million of resources for the Sections 157 and 163 grant
programs formerly appropriated in the Federal Highway Administration's
budget. NHTSA has administered these funds since their creation; the
fiscal year 2004 budget merely proposes that those same funds be
appropriated directly to NHTSA.
The grant award process under TEA-21 was very complex and time
consuming for the States, and resulted in increased administrative
overhead that could otherwise be applied to safety programs. It
contained eight programs with various qualification and administrative
requirements. NHTSA wants to simplify the system by reducing the number
of programs and streamlining the process to qualify for, and
administer, grant funds. NHTSA is also tying additional Section 402
funds to a State's highway safety performance, based on performance
measures that are aligned with the national highway safety goals. Last
week, the Administration released its proposal to reauthorize the
surface transportation programs. These reforms are outlined in that
proposal.
PROGRAM HIGHLIGHTS
Deaths and injuries can be prevented by building on the proven
success of existing programs and, when indicated, developing new
programs and evaluating their effectiveness. Within the two broad
program areas, our programmatic emphasis for fiscal year 2004 focuses
on five priority areas: safety belt and child restraint use, impaired
driving, vehicle rollover, vehicle compatibility and traffic records/
data collection. We have set up internal Integrated Project Teams
(IPTs) in four of these areas to examine the issues and recommend
solutions. The teams have recently concluded their work and have
developed recommendations for the agency to pursue. Recently, the
Secretary reiterated his commitment to implementing a balanced program
focused on the 3 Es of Injury Prevention--engineering, enforcement, and
education. The IPTs' work reflects the program strategies and options
needed to produce such a balanced effort. My statement will address
each of these.
Safety Belt and Child Restraint Use
Safety belt use cuts the risk of death in a crash in half. The good
news is that in 2002, safety belt use in the United States reached 75
percent--an all-time high. All 50 States, the District of Columbia, and
Puerto Rico had child passenger safety laws, and 49 States had adult
safety belt laws in effect. As of October 2002, eighteen States, the
District of Columbia, and Puerto Rico had primary safety belt laws in
effect, meaning that drivers and passengers can be cited for failure to
wear a safety belt. The remaining States, except New Hampshire, had
laws preventing police from issuing a citation unless another traffic
law was broken. These are referred to as secondary laws. New Hampshire
continues to have no adult safety belt law. We are pleased to report
that, due to immense effort and a successful partnership among
government, safety groups, and African-American interest groups, safety
belt use among African-Americans increased to 77 percent, a level above
that of the general population, and an eight percentage-point increase
since 2000. Belt use among those living in rural areas increased to 73
percent in 2002, a five percentage-point gain. However, the bad news is
that despite these success stories, we continue to have entrenched and
intractable problems that continue to challenge us. Most notably,
during 2002, the 25 percent of passenger vehicle occupants who failed
to use safety belts cost themselves and America 6,800 preventable
deaths and 170,000 preventable injuries, resulting in $18 billion in
medical costs, lost productivity, and other injury-related expenses.
Our safety belt use target for 2003 is 78 percent, and our 2004
target is 79 percent nationwide. These targets are optimistic but
achievable. Based on the National Occupant Protection Use Survey
(NOPUS) data for 1994-2001, the agency estimates that each year
approximately 8.5 percent of non-safety belt users have converted to
being regular belt users. Continuing to convert this percentage each
year becomes increasingly more difficult because, as the conversion
occurs, the hard-core non-users become a higher proportion of the
remaining non-users. If we are successful in meeting the 2004 target,
an estimated 1,000 more lives would be saved and 28,000 more injuries
prevented.
Most passenger vehicle occupants killed in motor vehicle crashes
continue to be totally unrestrained. If we were to achieve a national
90 percent belt use, nearly 4,000 additional lives would be saved each
year. This usage rate is not only possible, it can be exceeded. For
example, in 2002, Hawaii achieved a 90.4 percent use rate, Puerto Rico
a 90.5 percent use rate, California a 91.1 percent use rate, and
Washington State a 92.6 percent use rate. To achieve these high use
targets in the remaining States, NHTSA will need to continue to employ
a combination of education, enforcement, and engineering strategies to
raise belt use, particularly among the most at risk populations.
States achieve high levels of belt use through enacting primary
safety belt laws, strict enforcement of existing laws, public education
using paid and earned media, and high profile law enforcement programs,
such as the Click it or Ticket campaign. Highway safety research and
our continuing evaluation of our programs have demonstrated that an
intensive, high visibility traffic enforcement program significantly
increases safety belt use.
NHTSA has supported high visibility enforcement for the last
decade, following a model that was developed in several States in the
early 1990s. With funding authorized under TEA-21 and with support from
this Committee, these campaigns have grown tremendously, saving
thousands of lives. Following a highly effective Click It or Ticket
program in eight southeastern States in 2001, the agency undertook a
similar campaign involving media saturation and highly visible
enforcement in 30 States in May 2002. In a study of ten States that
completely adopted the model, safety belt use was shown to increase an
average of nine percentage points, with one State--Vermont--
experiencing a 19 percentage-point increase, followed by West Virginia
with a 15 percentage-point increase.
We are in the midst of carrying out the 2003 Click It or Ticket
national campaign. This year, 43 States, the District of Columbia, and
Puerto Rico qualified for grant funds to support Click It or Ticket
campaigns. This year, Congress provided funding for NHTSA to purchase
$10 million of national advertising that will further enhance the
benefit of these State and local enforcement campaigns. These ads are
currently playing. In addition, the occupant protection program
includes demonstrations of new strategies for increasing belt use among
high-risk, low-use groups, such as pick-up truck drivers, minorities,
and teens. Support for the high visibility enforcement campaigns,
together with resources to support paid and earned media and new
strategies for reaching high-risk groups, will contribute to achieving
our 2003 target and prepare for further gains in coming years.
In fiscal year 2004, NHTSA plans to continue to encourage States to
embrace the Click It or Ticket campaign and to begin investigating
strategies to assist States with integrating high visibility
enforcement into their ongoing routine enforcement. NHTSA has proposed
a new primary safety belt law incentive grant program that is expected
to result in additional States upgrading their laws, and a performance-
based safety belt use rate grant program for States to encourage them
to make progress on raising safety belt use. In 2002, States with
primary safety belt laws averaged 80 percent use, 11 percentage points
higher than those with secondary laws. We are hopeful that by rewarding
States for enacting primary safety belt laws or achieving 90 percent
use rates, fatalities and injuries in those States will decline. As an
additional inducement, we are proposing that the States receiving such
incentive awards be permitted to apply those funds to highway safety
infrastructure projects contained in the State's Integrated Highway
Safety Improvement Program. In addition, the agency will utilize the
results of our high-risk group demonstration programs to develop
educational programs and materials that are intended to increase use
among these populations.
We will continue these high profile programs in fiscal year 2004
because they succeed in reminding the motoring public that using safety
belts and child safety seats saves lives, and create an added incentive
to wear belts for those who currently break the law. We are serious
about reducing the yearly financial toll to America from the failure to
wear safety belts.
In addition to our success in raising safety belt use, we have made
steady progress in getting more children restrained. Restraint use by
young children rose to unprecedented levels in 2002. In 2002, NHTSA's
NOPUS survey showed that the rate for child restraint use was 99
percent for infants (under 12 months), 94 percent for toddlers (1-3
years), and 83 percent for children ages 4-7. Our 2002 estimates
indicate that fatalities among children ages 0-7 years continued to
decline, reaching another historic low. Unfortunately, these data also
show an increase in highway deaths for children 8-15 years. The number
of occupant fatalities for children in this age range rose by nearly
nine percent over 2001.
To comply with the Transportation Recall Enhancement,
Accountability, and Documentation (TREAD) Act's goal of reducing deaths
and injuries by 25 percent among 4- to 8-year-olds by 2006, NHTSA
published a five-year strategic plan in a report to Congress in June
2002, focusing on improving consumer awareness, booster seat safety
benefits, and the enforcement of booster seat laws, as well as a study
on the overall effectiveness of booster seats. A November 5, 2002,
final rule established a consumer information program to rate child
restraints on ease-of-use. The fiscal year 2004 New Car Assessment
Program (NCAP) budget request will support child safety seat Ease-of-
Use ratings for over 90 percent of the child safety seats on the
market. These ratings will be published annually in a brochure and on
the Internet, starting this spring.
Impaired Driving
Impaired driving rates have decreased for drivers of all age groups
involved in fatal crashes over the past decade, with drivers 25 to 34
years old experiencing the greatest decrease, followed by drivers 16 to
20 years old. However, our 2002 estimates indicate that alcohol-related
fatalities rose for the third consecutive year. Preliminary 2002 data
indicate that an estimated 17,970 people died in alcohol-related
crashes (42 percent of the total fatalities for the year), and even
though this is a 25 percent reduction from the 23,833 alcohol-related
fatalities in 1988, it is an increase of 3 percent over 2001. We must
reduce these statistics even further through more aggressive programs
that deter impaired driving.
NHTSA's target for 2004 is to reduce the rate of alcohol related
fatalities to 0.53 per 100 million VMT from the current 2002 actual
rate of 0.64.
In 2003, the agency is encouraging States to adopt high-profile law
enforcement programs, combined with paid and earned media saturation.
These programs will combine a high level of sustained enforcement with
intense enforcement mobilizations around the July 4 and December
holiday periods. As with the Click It or Ticket campaign, these
programs will use both paid and earned media to alert the public about
the increased risk of arrest if they fail to observe highway safety
laws. In fiscal year 2002, Congress provided $11 million for paid media
and $1 million for evaluation in support of these programs. NHTSA is
working intensely with 13 States on this type of high visibility,
enforcement-focused campaign. The first of these campaigns was in
December 2002 through early January 2003. We are currently collecting
the data from these States to determine the overall success of this
mobilization on the numbers of deaths and injuries. We appreciate the
support of Congress in enhancing these law enforcement campaigns.
In fiscal year 2003, we are also continuing to support State
activities to upgrade impaired driving laws. Currently, 39 States, the
District of Columbia, and Puerto Rico have enacted laws making it
unlawful for a driver to operate a motor vehicle with a blood alcohol
concentration (BAC) of .08 percent, up from 28 this time last year. In
addition, all States and the District of Columbia now have zero
tolerance laws setting the illegal BAC limit at no higher than .02 for
drivers under age 21. We will continue to urge strong State legislation
as a framework for an effective impaired driving program. In addition,
NHTSA is conducting a range of demonstration programs to develop
strategies for upgrading prosecution and adjudication processes, and
improving impaired driver records systems to track repeat offenders.
NHTSA's fiscal year 2004 impaired driving program will continue to
focus on highly sustained and periodic law enforcement campaigns,
together with implementing improvements to the prosecution,
adjudication, and records systems. We will also be developing
additional strategies based in part on what we learn from the You Drink
& Drive. You Lose. campaign results. For fiscal year 2004, the agency
has proposed a State grant program that will focus resources on a small
number of States with high alcohol-related crashes. The grant program
will include support for States to conduct detailed reviews of their
impaired driving systems by a team of experts and assist them in
developing a strategic plan for improving programs, processes, and
reducing impaired driving-related fatalities and injuries. This year,
we have begun implementing recommendations from the Criminal Justice
Summit on Impaired Driving held in November 2002. These include
training and legal advice in the prosecution and adjudication of DWI
cases, and working with licensing and criminal justice authorities to
close legal loopholes. NHTSA will also focus on the increasing rates of
motorcycle fatalities, particularly since 37 percent of all motorcycle
fatalities are alcohol-related. Finally, in addition to the enforcement
campaign and grant program, in fiscal year 2004 we will continue to
focus on the most at-risk populations such as youth, 21-34-year-olds,
and repeat offenders, and conduct more studies on finding vehicle-based
solutions for impaired driving behavior including using the National
Advanced Driving Simulator. These studies will be used to refine agency
countermeasures and regulatory initiatives.
NHTSA believes that continued nationwide use of sustained high-
visibility enforcement, encouraging States to adopt proven remedies and
paid and earned media campaigns, together with the targeted State grant
program and support activities, will lead to a resumption of the
downward trend in alcohol-related fatalities that we experienced over
the past decade.
Vehicle Rollover
Rollovers account for less than five percent of all passenger
vehicle crashes, but one-third of passenger vehicle occupant deaths. In
2002, an estimated 10,626 people died in the United States in rollover
crashes, up 4.9 percent from 10,130 in 2001. This type of crash
accounts for less than five percent of all passenger vehicle crashes,
but one-third of passenger vehicle occupant deaths. Light trucks
(particularly pickup trucks and sport utility vehicles) have a rollover
rate significantly higher than passenger cars because light trucks have
higher centers of gravity and are more prone to rollover during certain
handling maneuvers. Fatalities in rollover crashes involving pickup
trucks and sport utility vehicles accounted for 53 percent of the
estimated increase in highway fatalities for 2002. Since light trucks
account for an increasing portion of total light vehicle sales, deaths
and injuries in rollover crashes will become a greater safety problem
unless something changes.
One step we have taken (beginning in 2001) is to rate vehicles in
our New Car Assessment Program (NCAP) for their propensity to rollover.
Our NCAP ratings are based on the vehicle's static stability factor,
which is calculated based on the height of the vehicle's center of
gravity and its track width. These rollover ratings correlate very
closely with experience in real-world crashes. The lowest rated, one-
star vehicles in our rollover NCAP have a 40 percent chance of rollover
per single vehicle crash compared to a 10 percent chance for vehicles
with the highest five-star rating. The National Academy of Sciences
independently evaluated our rollover NCAP ratings and found that our
current ratings are valuable and accurate, but suggested the ratings
could be even better if we also evaluated vehicles in a dynamic
rollover test that measures how vehicles perform in emergency steering
conditions. We have proposed to adopt this change, consistent with
Congress's direction in the TREAD Act, and our fiscal year 2004 budget
includes $1.9 million to implement this change in the 2004 model year.
We believe this combined rollover rating will help us understand the
real-world rollover experience and thereby give the American public a
more useful piece of information for choosing a new vehicle.
Our experience in rating vehicles for rollover shows that vehicles
differ significantly. For instance, sport utility vehicles receive from
one star to four stars for rollover resistance. Pickup trucks range
from one star to three stars. We want to make sure that people who are
choosing to drive sport utility vehicles and pickup trucks have the
information that will allow them to choose the ones less prone to roll
over.
While we would like to prevent rollovers from happening in the
first place, we recognize that some rollover crashes will occur. Thus,
we must also consider other actions that will help reduce deaths and
injuries in rollover crashes. We expect to announce proposed upgrades
of our door lock requirements and our roof crush standard in fiscal
year 2004. Finally, we are considering a proposal to reduce ejections
through windows.
However, there is another step that we need to emphasize for
improved safety in rollovers--one that can be taken today with no
changes whatever to vehicles. We can significantly reduce deaths and
injuries in rollover crashes if we can get more Americans to use the
safety belts that are in their vehicles today. Most people killed in
rollovers are ejected totally or partially from the vehicle. Safety
belts can prevent nearly all of these ejections. Safety belts are 80
percent effective in preventing deaths in rollovers involving light
trucks and 74 percent effective in rollovers involving passenger cars.
Vehicle Compatibility
The vehicle fleet has changed dramatically in the last 20 years,
and these changes have given rise to an unprecedented vehicle mismatch
in vehicle-to-vehicle crashes. Of course, vehicle compatibility has
been a concern for longer than the past 20 years, but the earlier
concerns about compatibility among different vehicles on the road were
primarily related to differences between large and small cars, and the
primary difference was simply the mass of the vehicles. However, more
recently, the rising popularity of light trucks, vans, and SUVs has
made the problem substantially more complex. Now, in addition to
differences in vehicle mass, we must address inherent design
differences, including disparities in vehicle height, geometry, and
vehicle stiffness. The fleet average weight of light passenger vehicles
that was approximately 3,000 pounds in 1990 is almost 4,000 pounds
today. Similar changes are occurring in front-end heights and
stiffness. The average initial stiffness of light trucks is about twice
that of passenger cars. This increases the risk of death and injury to
occupants in certain passenger vehicles when they interact with the
more aggressive ones.
While light trucks and vans (LTVs) account for 38 percent of all
registered vehicles, they are involved in approximately half of all
fatal two-vehicle crashes involving passenger cars. In these
collisions, about 80 percent of the fatalities are passenger car
occupants. We need to address this problem now since LTVs constitute
half of all new vehicle sales.
An Integrated Project Team from offices within the agency has been
addressing this issue. I expect to publish that team's recommendations
for public comment in the very near future. This team has identified
some ways in which the safety features of a struck vehicle may be
improved to better protect the occupants in a crash with a more
aggressive vehicle and measures to reduce the aggressiveness of
striking vehicles. The safety problems associated with vehicle
compatibility are complex and will need focused research and other
efforts to solve them.
The greatest problem in vehicle compatibility occurs when an LTV
strikes a passenger car in the side. In the near term, we expect to
propose a significant upgrade to our side impact protection standard.
While improving upon the protection already provided to the chest and
pelvis in our side impact standard, this upgrade will also add a
measure of head protection to our side impact standard, because our
data show that head injury is a serious risk in side crashes. We will
also explore the idea of adding different sized dummies to our side
impact standard.
I am also happy to tell you that NHTSA is not the only party that
is trying to address compatibility. Vehicle manufacturers have
acknowledged that they also have a responsibility to address this
issue. Manufacturers have formed their own working groups to develop
recommendations for some voluntary actions that can be taken to improve
vehicle compatibility. These manufacturers have committed to developing
initial recommendations by late spring. In addition, the government of
Japan has committed to share test data and other information with NHTSA
on the issue of vehicle compatibility. With this international
cooperation, the American people will get a much quicker response to
the problem of vehicle compatibility than if NHTSA were to address this
issue by itself.
Traffic Records/Data Collection
Crash Causation Data
NHTSA's fiscal year 2004 budget request includes a proposal to
enable us to update our crash causation data, last generated
comprehensively in the 1970s. Vehicle design, traffic patterns, numbers
and types of vehicles in use, on-board technologies, and lifestyles
have changed dramatically in the last 30 years. Old assumptions about
the causes of crashes may no longer be valid. Since the agency depends
on causation data to form the basis for its priorities, we must ensure
that this data is current and accurate. We have requested $10 million
to perform a comprehensive update of our crash causation data that will
allow us to target our efforts for the next decade on the factors that
are the most frequent causes of crashes on American roads.
NHTSA has in place an infrastructure of investigation teams that
will enable us to perform the study efficiently and accurately. These
teams are currently performing a similar study for large, commercial
truck crashes and are adept at gathering evidence from the crash
scenes, the hospital, and from victim and witness interviews. Their
findings will guide the agency's programs in crash avoidance, including
vehicle technologies, as well as human factors.
State Traffic Records
Reliable, valid, and comprehensive crash data are the backbone of
all efforts to improve highway safety. Accurate problem identification
is vital if the highway safety community is to understand the scope and
extent of their crash issues. Problematic to this is the fact that
States are under increasing budgetary constraints that severely impact
their ability to maintain or improve their Traffic Records System (TRS)
data. Due to personnel reductions, law enforcement agencies in many
States now maintain data only on fatal and severe injury crashes as
opposed to crashes of all severities. Deficiencies in States' TRS data
negatively impact national databases including the Fatality Analysis
Reporting System, General Estimates System, National Driver Register,
Highway Safety Information System, and Commercial Driver License
Information System, as well as State data used to identify local safety
problems. In fiscal year 2004, NHTSA is requesting an additional $50
million for a new Traffic Records/Data Improvement Program in the
States. The new initiative will provide incentive grants to States to
support improved TRS data. In addition to police reports, emergency
medical services, driver licensing, vehicle registration, and citation/
court data provide essential information not available elsewhere. All
would be improved by this program. Accurate State TRS data are critical
to identifying local safety issues, applying focused safety
countermeasures, and evaluating the effectiveness of countermeasures.
Mr. Chairman, this concludes my statement. I would like to thank
the Committee for its continued steadfast support of our programs. I
look forward to working with you, as well as my partners appearing
today to testify, in developing a strong and productive performance-
based, results-oriented, safety program that will provide national
leadership through effective and efficient programs. I would be pleased
to answer any questions.
Federal Motor Carrier Safety Administration
STATEMENT OF ANNETTE SANDBERG, ACTING ADMINISTRATOR
Senator Campbell. Ms. Sandberg.
By the way, your complete written testimony will be
included in the record. If anyone on the panel wants to
abbreviate, feel free to do so.
Ms. Sandberg. Thank you, sir.
Good morning, Mr. Chairman and members of the committee.
Thank you for the opportunity to appear before you today to
discuss the Federal Motor Carrier Safety Administration's
initiatives in fiscal year 2004. I want to thank you for your
support and the resources you have provided to our agency since
our creation in 1999.
Fatalities and crashes involving large trucks have declined
4 years in a row. This is significant progress. However, we
know we can make our highways even safer.
Accordingly, a goal of the Bush Administration is to
improve safety and to reduce the number of accidents and deaths
on our highways. Fulfilling this goal is Secretary Mineta's top
priority. I, too, share this priority.
DOT's current highway safety goal is to reduce the fatality
rate by 41 percent by the year 2008. This equates to a rate of
1 fatality per 100 million vehicle miles traveled.
The Federal Motor Carrier Safety Administration has a goal
that is part of the overall Department goal. The Federal Motor
Carrier Safety Administration's goal is a rate of 1.65
commercial vehicle crash fatalities per 100 million miles of
truck travel. Achieving our goal will be challenging, as
commercial vehicle miles of travel is increasing at a rate
faster than passenger car miles of travel.
The Motor Carrier's performance-based budget is consistent
with the goals and programs established in SAFETEA, the
administration's reauthorization proposal. Our fiscal year 2004
request focuses resources in several critical areas.
One of these areas is our New Entrant Program. As directed
by Congress, the New Entrant Program will require that new car
carriers undergo a safety audit within their first 18 months of
operation. New entrants represent a significant commercial
motor vehicle safety risk. Statistics show new carriers are
less likely to know and to comply with Federal safety
standards.
Our fiscal year 2004 budget request includes resources for
a Federal/State partnership to implement the New Entrant
Program. Forty-six States are committed to working with us, in
full or in part, to conduct new entrants safety audits. We
believe that the Federal/State partnership will yield
significant benefits.
Another area for investment is hazardous materials
transportation. Each day more than 800,000 hazardous material
shipments cross the United States, 94 percent of which travel
by highway. Our goal is to achieve a 20 percent reduction in
truck-related HAZMAT incidents by the year 2010. We will
accomplish this goal through targeted enforcement and
compliance efforts, including the implementation of a
permitting program for certain carriers of extremely hazardous
materials.
In partnership with the States, we propose to expand
inspection efforts at the northern border with an emphasis on
increased roadside inspections at remote border crossings.
Inspecting commercial motor vehicles transporting hazardous
materials will be a priority with emphasis on driver's license
checks and vehicle screening for explosives. We anticipate that
the program will yield more inspections of Canadian vehicles,
more inspections of vehicles transporting HAZMAT, and an
increased inspection presence at the U.S. and Canadian border
crossings.
Southern border safety also remains a priority for our
agency. The fiscal year 2002 Appropriations Act required that
the DOT Inspector General verify that a number of statutory
conditions be met before the U.S./Mexican border could order to
long haul commercial traffic. The Federal Motor Carrier Safety
Administration has met these requirements.
Currently, the border remains closed due to a ruling of the
9th Circuit Court of Appeals. The administration is considering
appropriate next steps. Meanwhile, our agency is ready now to
ensure the safety of border operations and will be ready
whenever the border opens.
Another area of investment is the Commercial Drivers
License Grant Program. We propose increasing the CDL grant
funding in fiscal year 2004 to improve State control and
oversight of licensing and third-party testing facilities to
detect and prevent fraudulent testing and licensing activities,
and to support the transfer of Mexican and Canadian driver
conviction and disqualification data from the States to the
Federal Motor Carrier Safety Administration's central
depository.
FMCSA is concerned about the increasing number of consumer
household goods complaints. The FMCSA receives thousands of
complaints annually about household goods carriers. In our
fiscal year 2004 budget request, FMCSA requested additional
staff to enhance our ability to pursue enforcement against
these abusive carriers.
Finally, it is crucial that the Federal Motor Carrier
Safety Administration institute a number of medical
certification programs in the fiscal year 2004, including an
establishment of a medical review board, the certification of
medical examiners, and the pilot programs on medical waivers
and exemptions. Establishment of the registry would respond to
the National Transportation Safety Board, which issued eight
safety recommendations in September, 2001, recommending that
FMCSA establish more comprehensive standards for qualifying
medical providers and conducting medical qualification exams.
PREPARED STATEMENT
I look forward to working with this subcommittee to advance
our mutual goal of improving safety on our Nation's highways,
and would be happy to answer any questions that you may have.
Thank you very much.
[The statement follows:]
Prepared Statement of Annette Sandberg
Good morning, Chairman Shelby, Ranking Member Murray, and Senators.
Thank you for this opportunity to discuss plans for the Federal Motor
Carrier Safety Administration (FMCSA) in fiscal year 2004. The ongoing
support provided by this Committee has enabled FMCSA to make
significant progress on several safety fronts, including increased
safety enforcement and compliance, as well as enhanced border safety
operations. Though we have seen fatalities in crashes involving trucks
reduced for four years in a row, clearly there is more that needs to be
done. My commitment is to improve commercial motor vehicle safety by
bringing greater efficiency and effectiveness to FMCSA's programs and
activities as reflected in the Administration's fiscal year 2004 budget
submission, and as envisioned by Congress when the agency was created.
This budget is consistent with the goals and programs established in
the Administration's reauthorization proposal, the Safe, Accountable,
Flexible, and Efficient Transportation Equity Act of 2003 (SAFETEA),
released on May 14.
The Department recognizes that a collaborative effort among
agencies is needed to significantly reduce the fatality rate on our
Nation's highways. The DOT highway safety goal is to reduce the
fatality rate by 41 percent by 2008. This equates to a rate of one
fatality per 100 million vehicle-miles-traveled. To achieve the DOT
goal, FMCSA, along with the National Highway Traffic Safety
Administration and the Federal Highway Administration, set goals within
their respective programs to contribute to meeting the Department-wide
target. FMCSA's targeted contribution to the DOT goal is set at a rate
of 1.65 commercial vehicle crash fatalities per 100 million miles of
truck travel by 2008. Achieving our goal will be a particular
challenge, as commercial vehicle miles of travel have been growing at a
faster rate than passenger car miles of travel. On average, over the
past 15 years, truck and bus travel has increased by 3.4 percent
annually while passenger car travel increases have been running at 2.8
percent. This trend is projected to continue.
I believe that our success will be driven by how well we target our
resources at safety problems. To do this effectively, we must use the
multiple data sources available to us. FMCSA is a data-driven,
performance-based organization. This makes the timely collection of
complete data a critical goal for us. Our programs and activities will
be focused on reliable and timely data upon which to base our policy
and programmatic decision-making and allocation of our operational
resources. Our performance-based approach will enable us to accomplish
three critical objectives: 1) achieve dramatic improvements in
commercial motor vehicle safety; 2) ensure that resources are directed
toward activities with the potential for the greatest safety impact;
and 3) develop information that demonstrates the value of the
government's investment in safety.
FMCSA's fiscal year 2004 budget request has been structured to
strengthen the linkage between resources and accomplishment of these
objectives. We have integrated our budget and performance information,
framed around the achievement of objectives in several critical areas.
NEW ENTRANT PROGRAM
Let me begin by outlining a critical area for investment, FMCSA's
New Entrant Program. As Congress set out in the Motor Carrier Safety
Improvement Act of 1999, a new entrant program to bring motor carriers
into compliance with safety regulations at the onset of operations can
improve safety. These new entrants, numbering 40,000-50,000 annually,
represent a significant commercial motor vehicle safety risk. Our
fiscal year 2004 budget request includes resources for a Federal-State
partnership effort to implement the New Entrant Program.
Overseeing and supporting the conduct of safety audits,
establishing baseline data, and implementing a program of regular data
collection to assess the progress of the New Entrant Program will
enable FMCSA to fulfill the statutory mandate to improve new entrant
safety performance. This program will also meet the requirements set
out in Section 350 of the fiscal year 2002 DOT Appropriations Act as a
precondition to opening the Southern border to Mexican commercial
vehicles.
We know already that 46 States will work with us, in full or in
part, to conduct new entrant safety audits. These States have agreed to
provide approximately 195 of the estimated 262 State and Federal
personnel needed to audit the 40,000 to 50,000 new entrants per year.
The State personnel will be either new hires or be reassigned from
other law enforcement duties. In fiscal year 2003, these individuals
are supported through Motor Carrier Safety Assistance Program grant
funds. Contracted safety auditors will be used to make up the balance
of staff needed. We also plan to hire 32 full-time Federal staff to
cover program oversight, including management, review, and approval of
the safety audits. We believe this Federal-State partnership will yield
significant results by placing funds in the hands of those closest to
the new entrant population, while maintaining appropriate Federal
support and oversight.
HAZMAT SAFETY AND SECURITY
Another area where resources are needed is in the transportation of
hazardous materials. Each day, there are more than 800,000 shipments of
HAZMAT in the United States, 94 percent of which move by highway. We
have established a goal of a 20 percent reduction in truck-related
hazardous materials incidents by 2010, as measured from the baseline of
2000. We plan to accomplish this through targeted enforcement and
compliance efforts.
First, our request includes funds for a HAZMAT permitting program
for certain carriers of extremely hazardous materials, as required by
Congress. This program will ensure that carriers of these dangerous
materials have implemented safety and security measures. FMCSA
anticipates issuing 2,700 HAZMAT permits in fiscal year 2004.
Second, a program to enhance commercial motor vehicle safety and
security at the northern border is being proposed. In partnership with
the States, we propose to expand current inspection efforts at the
northern border with an emphasis on conducting additional roadside
inspections at or near the more remote border crossings. The highest
priority will be given to inspecting commercial motor vehicles
transporting HAZMAT, with emphasis on driver license checks and vehicle
screening for explosives. It is anticipated that 200,000 HAZMAT vehicle
inspections will be performed at the northern border in 2004 by the
State inspectors hired under this program.
Third, FMCSA will continue its base program of hazardous materials
regulatory compliance and outreach and education. For example,
responding to the events of September 11, FMCSA contacted nearly 42,000
hazardous materials carriers and conducted nearly 31,000 Security
Sensitivity Visits. FMCSA has since launched a program of ``Security
Contact Reviews'' to maintain a high level of vigilance within the
industry. Funds requested will enable FMCSA to integrate Security
Sensitivity Visits into compliance review activities conducted by our
field offices.
SOUTHERN BORDER ENFORCEMENT
Southern Border safety activities remain a high priority for FMCSA.
In the fiscal year 2002 Appropriations Act, Congress established
requirements for opening the U.S.-Mexico border to long-haul commercial
traffic. One of these requirements was that the DOT Inspector General
must verify that all statutory conditions have been satisfied. As DOT
Inspector General Ken Mead reported in March, FMCSA has met these
requirements, including the hiring and training of enforcement
personnel and the establishment of inspection facilities and safety
procedures at the southern border. Because of our actions, Secretary
Mineta was able to certify that the Department had met the requirements
of Section 350 providing a basis for the President to lift the
moratorium on granting operating authority for Mexican carriers to
operate within the interior of the United States.
Currently, the border remains closed due to the 9th Circuit Court
ruling that DOT had not conducted the appropriate, in-depth
environmental analysis for certain rules designed to satisfy the
Congressional requirements. The Court held that the environmental
assessment that the agency prepared was inadequate, and that FMCSA
should have prepared an Environmental Impact Assessment and Clean Air
Act Conformity Analysis. The Administration filed an en banc appeal of
the decision to the 9th Circuit on March 10, which was denied. The
Administration is considering appropriate next steps in responding to
the ruling. Meanwhile, FMCSA is ready now, and will be ready whenever
the border is opened, to ensure the safety of border operations. At
present, border inspectors and auditors are conducting inspections and
safety audits on commercial zone carriers. Border safety investigators
are assisting other FMCSA staff in conducting compliance reviews to
maintain their skills, as well as conducting compliance reviews on
commercial zone carriers. Additionally, border safety investigators
have been deployed to do additional inspections at the border.
COMMERCIAL DRIVERS LICENSE (CDL) GRANTS
Improving the accuracy and completeness of driver history records
is key to enhanced safety. The driver's license is the main form of
personal identification in the United States. Ensuring positive
identification license holders is dependent upon a diverse set of
security technologies. Particularly in the transport of hazardous
materials, States need current driver licensing technology for security
purposes. Grants under this program will allow States to enhance this
technology.
We are proposing increased CDL grant funding in fiscal year 2004 to
accomplish: 1) improving State control and oversight of State licensing
agency and third party testing facilities; 2) developing management
control practices to detect and prevent fraudulent testing and
licensing activities; 3) supporting State efforts to conduct Social
Security Number and Immigration and Naturalization Service number
verification for CDLs; and 4) maintaining the central depository of
Mexican and Canadian driver convictions in the United States, the
disqualification of unsafe Mexican and Canadian drivers, and the
notification of Mexican and Canadian authorities of convictions and/or
disqualifications.
Together, these activities will add to the variety of driver's
license technologies for safety and security, as well as enhancing our
ability to identify problem drivers.
HOUSEHOLD GOODS ENFORCEMENT
I am sure that the Chairman and Senators of this Subcommittee, as
well as your Senate colleagues, have noticed an increase in the number
of constituent complaints regarding unscrupulous household goods
carriers. The letters we receive, as well as the calls coming into the
FMCSA hotline, have been increasing. FMCSA receives thousands of
consumer complaints annually. Currently, the Agency has three full-time
commercial investigators devoted to the Household Goods Enforcement and
Compliance program and has budgeted for more in fiscal year 2004 to
expand enforcement of the Federal Motor Carrier Commercial Regulations.
While the household moving industry as a whole performs over a
million successful moves annually, a small group of unscrupulous people
scattered over a handful of States has used this industry to defraud
unsuspecting consumers of their hard-earned money. The complaints from
the American moving public have reached significant proportions. FMCSA
has gathered data to define how, when, and where to focus a limited
number of requested resources to inoculate the public against these
predators.
These resources will establish a more visible enforcement program
through increased investigations, and a more robust outreach effort to
reduce the number of consumer complaints filed against household goods
carriers and brokers. Our efforts will also be aimed at increasing
consumer awareness to allow the public to make better-informed
decisions before they move across State lines.
FMCSA also proposes to conduct an extensive study of existing
Household Goods Dispute Settlement Programs and alternative arbitration
programs in the household goods moving industry. We need this critical
information to determine the extent of the challenge, to determine
effective strategies and countermeasures, and to evaluate the
effectiveness of these programs in resolving loss and damage disputes
and claims between shippers and carriers.
Household goods carriers operating in interstate commerce are
required to have or participate in an arbitration program as a
condition of their registration with FMCSA. The arbitration programs
must comply with the requirements of 49 U.S.C. 14708, and the carrier
must submit to binding arbitration upon a shipper's request for cargo
damage or loss claims of $5,000 or less. Seventy-five percent of the
complaints we receive pertain to loss and damage claims. FMCSA believes
this study is necessary to determine what changes are needed to assist
the moving industry in establishing effective arbitration programs to
resolve loss and damage disputes. Currently, FMCSA does not have
adequate data or records to evaluate effectively the arbitration
programs in the moving industry. We are hopeful that this study will
provide a future roadmap to better address household goods complaints.
REGULATORY DEVELOPMENT
Regulatory Development is the cornerstone of FMCSA's compliance and
enforcement process. This is an area where greater attention and
resources are needed to promulgate all mandated regulations to ensure
program performance will not be compromised. For this reason, we are
proposing to dedicate funds to our regulatory development program and
have already implemented a defined operating procedure to further
accelerate our efforts.
I recently issued a directive to the agency establishing a revised
process by which our agency will develop regulations. This directive is
modeled on the procedures used in other Federal agencies. It promotes
staff collaboration, establishes early regulatory evaluation and
analysis, while setting out clear milestones. The new process is
designed to improve both the quality and timeliness of our rulemakings.
It is team-based and designed to build agency consensus through early
involvement by senior managers. Staff has been instructed that all
FMCSA rulemakings should immediately begin to follow the new procedures
set forth in the order.
The new process is already being put to use as FMCSA responds to a
Writ of Mandamus. As you may know, on November 26, 2002, the DOT
Secretary and FMCSA were served with a Petition for a Writ of Mandamus
for Relief from Unlawfully Withheld Agency Action. Citizens for
Reliable and Safe Highways (CRASH), Parents Against Tired Truckers
(PATT), Teamsters for a Democratic Union (TDU), and Public Citizen
filed the Petition. The Petition seeks a court order directing DOT to
promulgate six regulations. In February 2003, the FMCSA, through a
settlement agreement, committed to a timetable for completing these
rules (referred to as the Mandamus rules). The Hours-of-Service rule
was among them. FMCSA published the Final Rule on Hours-of-Service in
the Federal Register on April 28, 2003. The effective date is June 27,
2003, with a compliance date of January 4, 2004. This time period is
needed to train 8,000 enforcement officers, update FMCSA computer
systems and manuals, and to educate the industry.
MEDICAL PROGRAMS
We will use our funds to examine alternative regulatory programs.
Congress provided FMCSA with authority to establish exemption and pilot
programs under strict safety controls. We now operate a vision
exemption program where applications total more than 60 per month. We
are approached routinely to consider other alternative programs to our
safety regulations. These resource intensive programs require a
consistent funding stream to operate successfully with ample oversight
and over multiple years.
Among the projected uses for regulatory development funding are the
establishment of a medical review board and the creation of a national
medical examiner registry. The medical review board will provide expert
medical opinion and advice to the agency as we update our medical
qualifications requirements. Expert medical advice will help us to
supplement the experience of our staff and enhance our medical program.
The medical examiner registry will permit FMCSA to provide more
comprehensive information on medical practitioners to drivers and
carriers. It will also help disseminate information to physicians
regarding medical policies and requirements relevant to the physical
qualifications of commercial drivers. This is an essential step to
upgrade the quality of CDL driver medical qualification exams. With the
registry, we will be able to better monitor the quality and practices
of medical examiners. A certification process will ensure that medical
examiners are qualified to perform driver physical exams. Establishment
of a medical registry would respond to the National Transportation
Safety Board, which issued eight safety recommendations in September
2001 requesting that FMCSA establish more comprehensive standards for
qualifying medical providers and conducting medical qualification
exams.
ORGANIZATIONAL EXCELLENCE
Finally, I would like to speak to FMCSA's organizational capacity.
Many lessons have been learned during these first three formative
years. The agency has experienced the traditional growing pains of a
new organization, but has also had to grapple with some nontraditional
ones as well. The rapid rate at which new programmatic and management
responsibilities came to the agency could not have been predicted.
These new activities, like the opening of the U.S.-Mexico border and
Security Sensitivity Visits, exacted a toll on both FMCSA and FHWA's
administrative capacities. Each agency was inundated with ever-
increasing workloads and heightened performance expectations.
The agency now finds itself at a critical juncture in its
organizational development. It is poised to meet the challenges of the
President's Management Agenda through human capital management,
improved financial performance, competitive sourcing, performance based
budgeting, and E-government. However, the agency's administrative and
information technology infrastructures are in need of additional
resources to support its workload and continue to focus on improved
safety performance. Our request in fiscal year 2004 will enable FMCSA
to procure the necessary administrative and information technology
resources at competitive market rates.
CONCLUSION
Thank you Mr. Chairman, Ranking Member Murray, and Senators of the
Subcommittee for this opportunity to present my plans for the Federal
Motor Carrier Safety Administration. I believe that your continued
investment in the agency will be rewarded by improved data collection,
reporting, analysis, and most importantly, higher levels of safety on
our Nation's highways. I look forward to working with you to achieve
our mutual goals and would be happy to answer any questions you may
have.
NONDEPARTMENTAL WITNESSES
STATEMENT OF WENDY J. HAMILTON, NATIONAL PRESIDENT,
MOTHERS AGAINST DRUNK DRIVING
Senator Campbell. Ms. Hamilton?
Ms. Hamilton. Good morning. I am Wendy Hamilton, the
National President of Mothers Against Drunk Driving.
It is an honor to be here today testifying on DOT's fiscal
year 2004 request and MADD's priorities for the reauthorization
of TEA-21. We look forward to working with this committee to
develop transportation policies that save lives and prevent
injuries on our Nation's highways.
I would like to take a moment to thank Chairman Shelby and
Ranking Member Murray for their commitment to reduce traffic
crashes and injuries and fatalities.
In DOT's fiscal year 2003 budget, this subcommittee
dedicated increased funding to NHTSA's impaired driving program
and began a historic effort by funding paid media to publicize
law-enforcement mobilizations designed to increase seatbelt use
and reduce alcohol impaired driving.
Senator Shelby and Senator Murray, your efforts mark the
beginning of what MADD hopes will be a renewed National, State
and local effort to reverse the deadly trend on our Nation's
highways.
For the third consecutive year, alcohol-related traffic
deaths have increased. Early statistics show that last year
nearly 18,000 people were killed and hundreds of thousands more
were injured in these crashes. Alcohol-involved crashes
accounted for an overwhelming 46 percent of all fatal injury
costs.
Unfortunately, the data speaks for itself. The Nation,
including its political leaders, has become complacent in this
effort. Lack of funding for effective behavioral traffic safety
programs and minimal resources for law-enforcement officers to
enforce existing laws are a major part of the problem.
Last week, MADD released its new Federal plan for the
reauthorization of TEA-21. On that day, we heard from members
of the Senate who expressed their firm commitment to move the
Nation in the right direction. MADD sincerely thanks Senator
Murray, Senator DeWine, Senator Lautenberg, and Senator Dorgan
for their participation in this event and their leadership to
reduce traffic death and injury.
Today, MADD is asking Congress and the administration to
adopt MADD's research-based plan. I would like to submit our
plan for the record and I believe that you have all received
copies of this.
Senator Campbell. It will be included in the record.
[The information follows:]
Ms. Hamilton. MADD's plan establishes a national traffic
safety fund of $1 billion annually. Under this fund, MADD
recommends dedicating increased funding for highly visible law
enforcement activities.
The ``Click It or Ticket'' national law enforcement
mobilization campaign has been very successful in increasing
seatbelt usage. We know that sobriety checkpoints are one of
the most effective tools this Nation has to stop impaired
driving, and that they are especially effective when coupled
with media campaigns that raise the visibility of these
efforts.
Thanks to this committee, funds were dedicated in fiscal
year 2003 to conduct these mobilizations. Why then has NHTSA
not requested any funding to continue this lifesaving effort?
I would like to thank Senator DeWine and Senator Lautenberg
for introducing legislation today that would provide
substantial funding for enforcement efforts to stop drunk
driving and increase seatbelt use. If enacted, this bill will
save lives.
MADD also recommends dedicating increased behavioral
funding for State efforts to improve traffic safety. While
NHTSA's funding appears to have increased dollars for
behavioral funding, this is not the case. Only a percentage of
this funding will be spent specifically on behavioral safety
since States are able to use much of this funding for roadway
construction and highway safety projects. Though NHTSA
continuously states that reducing alcohol-related traffic
fatalities is a top priority, the fiscal year 2004 budget
request simply does not support these claims.
MADD was shocked to learn that the impaired driving
programs merit less than one page out of DOT's 378-page SAFETEA
proposal. SAFETEA actually decreases funding for alcohol-
impaired programs by 67 percent. The only funding specifically
allocated for impaired driving is $50 million. The overwhelming
majority of safety funding in the SAFETEA proposal is budgeted
in the new Highway Safety Improvement Program which is really
dedicated to roadway construction safety projects. This
specific construction safety program receives an overwhelming
117 percent increase.
While construction safety is important, the DOT itself,
along with the GAO, recognizes that human behavior not roadway
environment is overwhelmingly seen as the most prevalent
contributing factor to crashes. To compare DOT's recreational
trails program, funded at $60 million in fiscal year 2004, it
receives 20 percent more funding than the impaired driving
grants program. It appears, from a budget standpoint, that
keeping recreational trails safe for a small population of
users is even more important to DOT than keeping all highway
users safe from impaired drivers. Again why?
MADD's plan calls for greater accountability controls to
ensure that Federal funds are being used in a strategic and
coordinated manner. Recently the GAO, at the request of Senator
Dorgan, released a detailed report detailing the management and
use of Federal highway safety funds. GAO concluded and
``NHTSA's oversight of highway safety programs is less
effective than it could be, both in ensuring the efficient and
proper use of Federal funds and in helping the States achieve
their highway safety goals.''
GAO's report shows that in the face of rising traffic
deaths more Federal oversight and guidance is needed for the
expenditure of Federal safety dollars to ensure that these
funds are spent on effective behavioral programs. This is
fiscal responsibility.
MADD is urging Congress to strongly encourage States to
enact proven traffic safety laws, such as a national primary
safety belt standard and high risk driver standards. MADD knows
that the best defense against a drunk driver is a seatbelt. As
NHTSA proposes, States should be given financial incentives to
enact primary belt laws.
However, States that do not enact this lifesaving measure
after 3 years should lose Federal highway construction funds.
MADD also calls for the enactment of a national standard to
combat higher risk drivers. While higher risk drivers are a
small portion of the problem, they pose a significant threat to
motorists.
Again, we thank Senator Lautenberg and Senator DeWine for
introducing legislation today that targets this dangerous
population. If enacted, this bill would close loopholes to
ensure that repeat and high blood alcohol concentration
offenders do not continue to slip through the cracks.
This priority is one that has personal meaning to me. On
September 19th, 1984, a high BAC driver caused the head-on
collision that killed my 32-year-old sister, Becky and my 22-
month-old nephew, Timmy. The crash occurred at 1:50 p.m. on a
beautiful Wednesday afternoon filled with sunshine. Three hours
after that crash, the offender tested at a .16 blood alcohol
concentration and police pulled four empty bottles of alcohol
from his vehicle.
This Nation lacks a clear coordinated solution to reduce
impaired driving fatalities. Maintaining the status quo or,
even worse, decreasing resources dedicated to fighting drunk
driving will not reverse this deadly trend. The reauthorization
provides the best chance, a historic opportunity to provide
adequate behavioral safety funding to ensure that these funds
are being used effectively and to enact laws that will save
lives.
PREPARED STATEMENT
I urge Congress to adopt MADD's proposal and create safer
roads for all Americans. Thank you and I welcome the
opportunity to answer questions.
[The statement follows:]
Prepared Statement of Wendy J. Hamilton
Good Morning. My name is Wendy Hamilton and I am the National
President of Mothers Against Drunk Driving. I am honored to be here
today to testify on the Department of Transportation's (DOT) fiscal
year 2004 budget request and MADD's priorities for the reauthorization
of the Transportation Equity Act for the 21st Century (TEA-21). We look
forward to working with the Committee to develop transportation
policies that provide appropriate funding and employ effective,
aggressive countermeasures to prevent injuries and save lives on our
Nation's roads.
I would like to take this opportunity to thank Chairman Shelby and
Ranking Member Murray for their commitment to reduce traffic crash
fatalities and injuries. In DOT's fiscal year 2003 budget Senator
Shelby and Senator Murray dedicated increased funding to the National
Highway Traffic Safety Administration's (NHTSA) impaired driving
program, and began a historic effort by funding paid media to publicize
law enforcement mobilizations designed to increase seat belt use and
reduce alcohol-impaired driving. Senator Shelby and Senator Murray--
MADD's 2 million members and supporters thank you for your dedication
and leadership to highway safety. Your efforts mark the beginning of
what MADD hopes will be a renewed national, State and local effort to
reverse the deadly trend on our Nation's highways.
ADMINISTRATION OUTLINES HIGHWAY SAFETY AS A PUBLIC HEALTH CRISIS;
HOWEVER, FUNDING REQUESTS DO NOT ADEQUATELY ADDRESS PROBLEM
According to DOT, motor vehicle crashes are responsible for 95
percent of transportation sector deaths and 99 percent of all
transportation-related injuries within the United States as well as the
leading cause of death for people ages 4 through 33. In 2002, an
estimated 42,850 people died on the Nation's highways, up from 42,116
in 2001.
This alarming amount of injury and death on our Nation's roadways
creates a tremendous drain on the Nation's economy. Economic losses due
to motor vehicle crashes cost the Nation approximately $230.6 billion
each year, an average of $820 for every person living in the United
States.
DOT's announcement of preliminary 2002 fatality estimates calls for
``better State laws that address the causes of the problem and stricter
enforcement.'' But DOT's fiscal year 2004 request and its
reauthorization proposal cut funding for behavioral safety initiatives,
even while DOT's own research demonstrates that human behavior is
overwhelmingly the leading factor in death and injury on our Nation's
roads.
ALCOHOL-RELATED TRAFFIC FATALITIES ON THE RISE FOR THIRD CONSECUTIVE
YEAR
For the third consecutive year, alcohol-related traffic deaths have
increased. Preliminary statistics show that nearly 18,000 people were
killed and hundreds of thousands more were injured in these crashes
just last year. That's 49 deaths and hundreds of injuries day in and
day out. Alcohol-involved crashes accounted for 21 percent of nonfatal
injury crash costs, and an overwhelming 46 percent of all fatal injury
crash costs. In order to reverse this trend, the Nation cannot maintain
the status quo and expect a different result.
Last week at a national news conference, MADD commemorated the 15-
year anniversary of the worst drunk driving crash in U.S. history--the
Kentucky Bus Crash. On May 14, 1988, 27 people--24 children and 3
adults--were killed and 30 others were injured coming home from a
church outing. They were victims of a repeat drunk driving offender,
behind the wheel of his pickup driving on the wrong side of the road.
He had a blood alcohol concentration of .24--three times the illegal
limit today in Kentucky and the majority of all other States and DC.
The Kentucky Bus Crash was heard around the world because 27
perished and 30 others were injured in an instant. But tragically, one
by one, over the past 15 years, the equivalent to 10,400 Kentucky Bus
Crashes have occurred in our country as nearly 281,000 Americans have
been killed and millions of others have been injured in alcohol-related
traffic crashes since that tragic day.
Unfortunately, the data speaks for itself: the Nation--including
its political leaders--has become complacent in this effort. Drunk
drivers continue to slip through cracks in the system. Weak laws, lack
of funding for effective traffic safety programs and minimal resources
for law enforcement officers to enforce existing laws are all part of
the problem. There is no coordinated effort at the national, State and
local level to combat this public health problem. Additionally, drunk
driving is still often treated as a minor traffic offense rather than
what it really is--the most frequently committed violent crime in our
country.
MADD'S SAFETY PLAN: PUTTING RESEARCH INTO PRACTICE
Last week MADD released its new Federal plan for the
reauthorization of Federal traffic safety programs. In conjunction with
MADD's announcement, we heard from Members of the Senate who expressed
firm commitment to move the Nation in the right direction. MADD
sincerely thanks Senator Patty Murray, Senator Frank Lautenberg,
Senator Mike DeWine and Senator Byron Dorgan for their participation in
this event and for their leadership to reduce traffic death and injury.
Today, MADD is asking Congress and the Administration to ensure
that highway safety is a cornerstone of the reauthorized TEA-21. And
they can do so by embracing MADD's research-based reauthorization plan.
MADD's plan would:
--Establish a National Traffic Safety Fund (NTSF)--$1 billion
annually--to provide a major infusion of dedicated Federal
funds to support State and national traffic safety programs,
enforcement and data improvements;
--Under the NTSF:
--dedicate increased funding for States and local communities to
expand highly visible law enforcement activities to reduce
impaired driving and increase seat belt use, including
national enforcement mobilizations supported by paid media;
--dedicate significantly increased funding for State efforts to
improve traffic safety by implementing data-driven
programs;
--Create stricter accountability controls to ensure that Federal
funds are being used in a strategic and coordinated effort at
both the State and Federal level;
--Encourage States to enact priority traffic safety laws, such as
primary seat belt enforcement, higher-risk driver and open
container standards.
I want to briefly talk in more detail about MADD's reauthorization
priorities.
Funding is key to the success of national, State and local traffic
safety programs to reduce drunk driving. But in the year 2001, while
traffic crashes cost taxpayers $230 billion, the Federal government
spent only $522 million on highway safety and only one-quarter of that
was used to fight impaired driving. Compared to the financial and human
costs of drunk driving, our Nation's spending is woefully inadequate to
address the magnitude of this problem.
Establishing a National Traffic Safety Fund would give those on the
front lines an increased, ongoing and reliable funding stream for
national, State and local highway safety programs. MADD recommends an
annual $1 billion dedicated fund for traffic safety programs. We know
that for every dollar spent on effective highway safety programs about
$30 is saved by society in the reduced costs of crashes. This would be
a wise investment.
States must have additional resources if they are expected to reach
their highway safety goals. Section 402, State and Community Highway
Safety grants, provides funding to States to support highway safety
programs designed to reduce traffic crashes and resulting deaths,
injuries, and property damage. TEA-21 authorized $163 million in fiscal
year 2003 for Section 402 grants. MADD recommends a substantial
increase in Section 402 funding to help States reach their highway
safety goals. Of the $1 billion annually, MADD recommends $425 million
for the reauthorized Section 402.
Although alcohol is a factor in 42 percent of all traffic deaths,
only 26 percent of all highway safety funding available to the States
through TEA-21 is spent on alcohol-impaired driving countermeasures.
Too often highway safety funding made available to the States is used
for other programs that may not save as many lives or prevent as many
injuries as priority traffic safety programs. It is critical that these
funds are spent on data-driven programs that include comprehensive
impaired driving and seat belt initiatives.
The National Traffic Safety Fund would also be used to expand
States' well-publicized law enforcement activities to curb drunk
driving and increase seat belt use. These law enforcement resources
would support training, over-time, technology and paid advertising
throughout the year. Additionally, funds would be available for three
highly visible national impaired driving and seat belt law enforcement
mobilizations.
These law enforcement activities should utilize, when possible,
frequent and highly visible sobriety checkpoints. These are among the
most effective tools used by law enforcement to deter impaired driving.
We know through research and real world experience that sobriety
checkpoints save lives. The CDC found that sobriety checkpoints can
reduce impaired driving crashes by 18 to 24 percent. These checkpoints
are especially effective when coupled with media campaigns that raise
the visibility and awareness of drunk driving enforcement efforts in
the community with the bottom line goal of deterring impaired driving
before it happens.
Without significant increases in the level of funding for these
critical safety programs, the current deadly trend will continue to
worsen.
But it is just as important to know where the money is going and
how it is being spent. That is why MADD is asking Congress to hold
States and the National Highway Traffic Safety Administration
accountable for the expenditure of Federal highway safety funds. Our
goal is not to make their jobs more difficult. It is to recognize that
political pressures and ``flavor of the month'' traffic safety issues
can influence how dollars are spent. If DOT's primary goal is to
reverse the current trend, it is time to create a more consistent
process that ensures the efficient and proper use of Federal funds to
help the Nation achieve its highway safety goals.
MADD also urges Congress to strongly encourage States to enact
proven traffic safety laws, such as a national primary seat belt
enforcement standard. According to NHTSA, for every percentage point
increase in seat belt usage, 280 lives can be saved. MADD knows that
the best defense against a drunk driver is a seat belt. The fact is, of
those killed in alcohol-related traffic crashes, 76 percent were not
wearing their seat belt. Had they been, a significant portion of them
would be alive today.
Drunk drivers typically do not buckle up, nor do they make sure
their passengers are properly restrained. The sad fact is that two-
thirds of children killed in alcohol-related crashes are passengers
driven by an impaired driver. We also know that seat belt use for
children generally decreases the more impaired a driver becomes. MADD
calls for the establishment of a national primary seat belt standard.
States would be eligible for ``jumbo'' financial incentives for three
years. States that have not enacted this lifesaving measure after three
years would lose Federal highway construction funds.
MADD also calls for the enactment of a national standard to combat
``higher-risk drivers.'' ``Higher-risk drivers'' are defined as repeat
offenders, those with BACs of .15 or higher, or persons caught driving
on a suspended license when the suspension is a result of a prior DUI
offense.
This priority is one that has personal meaning for me. On September
19, 1984, a high BAC driver caused the head-on collision that killed my
32-year-old sister Becky and my 22-month old nephew Timmy. Three hours
after the crash, the offender tested at a .16 BAC. Police pulled four
empty bottles of alcohol from his vehicle.
While higher-risk drivers are a small portion of the population,
they pose a significant threat to innocent motorists. On a typical
weekend night, only one percent of drivers have a BAC of .15 or higher,
but high BAC drivers were involved in over one-half of all alcohol-
related traffic deaths in 2000. And, about one-third of all drivers
arrested or convicted of DUI are repeat offenders. Clearly, we need
leadership from Congress and the Administration to encourage States to
act now to get this most dangerous segment of the driving public off of
our roads.
MADD is backing research-based solutions to address the higher-risk
driver through what we call: Restrictions, Restitutions and Recovery.
Restrictions include mandatory sentencing, strict licensing and vehicle
sanctions such as immobilization and ignition interlock devices.
Restitution includes payment to victims and to the community by
offenders. Recovery focuses on efforts to address the offender's
substance abuse and addiction. States that do not enact comprehensive
higher-risk driver legislation would lose Federal highway construction
funds.
Lastly, MADD calls on Congress to enact a national ban on open
containers in the passenger compartment of motor vehicles. Open
container laws separate the consumption of alcohol from the operation
of a vehicle. A common-sense measure, banning open containers in the
passenger compartment of a vehicle will decrease the likelihood that
drinking and driving will occur. One NHTSA study found that States with
open container laws have lower rates of alcohol-related fatalities,
while another study conducted by the Stanford University Institute for
Economic Policy Research found that, controlling for other variables,
open container laws had a significant effect on reducing fatal crash
rates (by over 5 percent).
The Kentucky Bus Crash reminds us that for every loss and for every
tragic death and injury there is untold suffering and emotion. That
said, MADD is committed to advocating research-based and proven-
effective countermeasures to prevent others from having to experience
what the families of these victims have suffered.
It's not about feel good. It's about doing what is right, and doing
what will most effectively save lives. That is what drives our agenda,
and that is what is behind our proposals for the reauthorization of
TEA-21.
NHTSA'S FISCAL YEAR 2004 BUDGET PROVIDES INADEQUATE RESOURCES AND
LITTLE GUIDANCE TO REACH HIGHWAY SAFETY GOALS
In the Fiscal Year 2004 Budget in Brief, NHTSA states that it is
``committed to pursuing an aggressive safety agenda'' and that
``[b]ehavioral safety initiatives will be directed to increasing safety
belt use and deterring impaired driving, which are central to achieving
the Department's traffic fatality goal.'' While NHTSA's funding request
appears to have increased monies for behavioral funding, this is not
the case. In fact, the fiscal year 2004 request is less than the fiscal
year 2003 request. This is because the fiscal year 2004 request
includes $222 million of TEA-21 resources for the Sections 157 and 163
grant programs formerly appropriated in the Federal Highway
Administration budget. NHTSA has always administered these funds and is
now requesting receipt of this funding directly. This apparent increase
is really no increase at all, just a shifting of grant funds.
The current fiscal year 2004 request for behavioral funding is
$516,309,000, but once Sections 157 and 163 monies are subtracted the
amount is lowered to $294,309,000. The fiscal year 2004 request is
actually $234,000 less than the fiscal year 2003 request.
Additionally, only a percentage of this funding will be spent on
behavioral safety since States are able to use this funding for roadway
safety/highway construction projects.
One of NHTSA's primary fiscal year 2004 goals is to reduce the rate
of alcohol-related highway fatalities per 100 million vehicle miles
traveled (VMT) to 0.53. In its Budget in Brief, NHTSA states the
following:
``The 2003 target of .53 per 100 million VMT, if met, will result
in a reduction of alcohol-related fatalities to 15,600 . . . It will be
a challenge to meet this target by the end of 2003. The agency is
implementing new programs in 2003 that should begin to see positive
results by the end of the year. Even though NHTSA should begin to see
results in 2003, the agency still may not be able to achieve the target
without the States and communities enacting and, more importantly,
enforcing strong alcohol laws and reforming their individual impaired
driving control systems.''
However, it is not clear from the fiscal year 2004 budget what
these new programs are and where the money is coming from to continue
them. NHTSA's fiscal year 2004 budget request clearly does not reflect
the severity of the impaired driving problem. While NHTSA's fiscal year
2004 budget states that ``Protecting vehicle occupants and deterring
impaired drivers are among the major ways we are able to reduce death
and injury,'' the level of funding for impaired driving countermeasures
is utterly insufficient. For example, the Impaired Driving Division
budget request is significantly lower than fiscal year 2002 enacted
levels (10,926,000 fiscal year 2004 request compared with 13,497,000
fiscal year 2002 enacted). NHTSA states that ``Aggressive actions are
needed to expand focus on several key high-risk populations, including
underage drinkers, 21-34 year olds, and repeat offenders,'' but seeks
fewer resources to reach these goals.
Under ``Anticipated Fiscal Year 2003 Accomplishments'' NHTSA
recognizes that ``Two nationwide law enforcement mobilizations (July
and December) will be conducted,'' bolstered by a national media public
service advertising campaign. The ``Click It or Ticket'' national law
enforcement mobilization campaign has been highly successful at
increasing seat belt usage. Thanks to the Senate, funds were dedicated
in the fiscal year 2003 budget to conduct similar national
mobilizations to reduce alcohol-impaired driving deaths and injuries.
However, NHTSA does not request any funding to continue this effort.
Additionally, NHTSA's State & Community Highway Safety Program
drastically reduces funds available to States for impaired driving
initiatives. NHTSA's fiscal year 2004 request provides a $50 million
impaired driving grant program to only a subset of States to
demonstrate the effectiveness of a comprehensive approach to reducing
impaired driving and for identifying causes of weakness in a State's
impaired driving control system. This funding level is $100 million
less than funds available to States in fiscal year 2003 for impaired
driving improvements.
While NHTSA continuously states that reducing alcohol-related
traffic fatalities is a top priority, the fiscal year 2004 budget
request does not support these assertions.
ADMINISTRATION'S ``SAFETEA'' PROPOSAL CUTS ALCOHOL-IMPAIRED DRIVING
FUNDING AND INCENTIVES, LACKS BEHAVIORAL SAFETY FUNDING
MADD was dismayed to learn that impaired driving control programs
merit less than one page out of the 378 page U.S. Department of
Transportation (DOT) surface transportation proposal. DOT's proposal,
``SAFETEA,'' falls woefully short of real ``safety'' for America's
roadways and includes an inadequate response to this urgent national
problem.
``SAFETEA'' decreases funding for alcohol-impaired programs by 67
percent. The proposal recommends an impaired driving program of only
$50 million, far less than current funding levels and clearly not
enough to reverse this deadly trend. In fiscal year 2003, TEA-21
authorized $150 million for alcohol-impaired driving countermeasures
and also contained requirements for States to enact repeat offender and
open container laws. If States failed to pass these alcohol-impaired
driving laws then a percentage of their Federal construction funds were
transferred. Not only does ``SAFETEA'' cut impaired driving funding to
$50 million, it also does not include any incentives to States to enact
alcohol-impaired driving laws.
In comparison, DOT's Recreational Trails Program (RTP)--$60 million
in fiscal year 2004--receives 20 percent more funding than the Impaired
Driving Grants Program. The RTP program provides funds to develop and
maintain recreational trails for motorized and non-motorized
recreational trail users. It appears, at least from a budget
standpoint, that keeping recreational trails safe for a small
population of users is even more important to DOT than keeping all
highway users safe from impaired drivers.
The overwhelming majority of ``safety'' funding in the ``SAFETEA''
proposal is budgeted in the new ``Highway Safety Improvement Program''
(HSIP), which is really a highway construction project program. In 2004
alone, $1 billion is allocated to the HSIP program. These funds are to
be used for ``safety improvement projects,'' defined below.
``A safety improvement project corrects or improves a hazardous
roadway condition, or proactively addresses highway safety problems
that may include: intersection improvements; installation of rumble
strips and other warning devices; elimination of roadside obstacles;
railway-highway grade crossing safety; pedestrian or bicycle safety;
traffic calming; improving highway signage and pavement marking;
installing traffic control devices at high crash locations or priority
control systems for emergency vehicles at signalized intersections,
safety conscious planning and improving crash data collection and
analysis, etc.''
While these are all important activities, DOT itself recognizes
that human behavior, not roadway environment, is overwhelmingly seen as
the most prevalent factor in contributing to crashes. The General
Accounting Office (GAO) released a report in March 2003 that reconfirms
this premise after surveying data, experts and studies focusing on
factors that contribute to motor vehicle crashes. Given that behavioral
factors account for the majority of traffic crashes, it is difficult to
understand the vastly disproportionate funding levels for behavioral
versus roadway construction safety programs and why DOT allows a
significant portion of the behavioral funds to be used to augment even
more roadway construction spending.
While NHTSA continuously states that reducing alcohol-related
traffic fatalities is a top priority, the Administration's ``SAFETEA''
proposal does not support these claims.
INCREASED RESOURCES ARE REQUIRED TO SIGNIFICANTLY REDUCE HIGHWAY DEATHS
AND INJURIES
Research demonstrates that certain programs and initiatives will
significantly reduce traffic deaths and injuries. In order to implement
these programs and initiatives, increased resources are needed. The
reauthorization of Federal highway safety programs provides the vehicle
to obtain more resources to combat this public health problem. MADD
urges Congress to consider the merits of each traffic safety program
based upon their ability to reduce or prevent alcohol-related traffic
fatalities. MADD's goal is to ensure that Federal traffic safety
dollars are spent on effective programs and that States pass basic laws
to combat alcohol-impaired driving.
NHTSA's traffic safety budget is wholly inadequate. Faced with the
highest number of highway fatalities since 1990, and a cost to
America's economy of over $230.6 billion annually, the agency's budget
request should reflect the growing need for more resources rather than
maintain the status quo. Currently, the Federal government's funding
for traffic safety programs does not reflect the importance of this
public health crisis. The reauthorization of TEA-21 offers Congress the
opportunity to review and reallocate funds to traffic safety.
GAO REPORT HIGHLIGHTS DEFICIENCIES IN OVERSIGHT OF HIGHWAY SAFETY
INITIATIVES
Recently the General Accounting Office (GAO) released a report
detailing the management and use of Federal highway safety programs and
funding. GAO concluded the following:
`` . . . NHTSA's oversight of highway safety programs is less
effective than it could be, both in ensuring the efficient and proper
use of Federal funds and in helping the States achieve their highway
safety goals.''
GAO's report shows that Federal oversight of State spending on
highway safety programs has been inadequate in the face of rising
traffic deaths and that NHTSA has not been consistently monitoring how
funds are being used. GAO also found that NHTSA has no consistent
policy for conducting State reviews or improvement plans. As a result,
some regional offices conduct reviews as infrequently as every two
years, while others conduct them only when a State requests one. This
clearly enables some States to slip through the cracks. For example,
the report found that the rate of alcohol-related traffic deaths rose
in 14 States between 1997 and 2001; in seven of those States, the rate
was higher than the national average, but only one of the seven States
had a NHTSA improvement plan. The GAO also found that seat belt use was
declining in some States that didn't have NHTSA improvement plans.
The GAO report also reveals how States use some of their highway
``safety'' funding. States that did not meet either the open container
or the repeat offender requirements in TEA-21 has a percentage of funds
transferred from their Federal highway construction program to their
Section 402 highway safety grants program. However, States were also
able to allocate transferred funds to highway construction projects
under the Federal Highway Administration's (FHWA) Hazard Elimination
Program (HEP). An overwhelming 69 percent of the transferred funds were
used by States for construction anyway projects anyway, the GAO
reported.
The GAO report demonstrates that more Federal oversight and
guidance is needed for the expenditure of Federal highway safety funds
to ensure that these funds are spent on effective behavioral programs.
Clearly there are legitimate areas of public health and safety in which
the Federal government should be involved in setting standards. Similar
to airline safety, highway safety warrants Federal government
involvement. In this country we have a national highway system.
Families should be protected from the consequences of impaired driving
whether they are driving through Alabama, Washington or North Dakota.
Impaired drivers do not recognize state boundaries. Drunk driving is a
national problem and it demands a national solution.
CALL TO ACTION: NATION'S LEADERS MUST PROVIDE A ROADMAP
However, our Nation lacks a clear, coordinated national and state
solution to reduce impaired-driving deaths and injuries. Congress now
has the opportunity to dedicate proper funding to address this public
health epidemic, and to ensure proper use of these funds. While
continued research efforts are critical in order to identify new and
improved methods to deter drunk driving, there are many proven,
research-based strategies that are not being used to reverse the
current deadly trend. These strategies can and must be employed to make
progress in the effort.
MADD urges Congress to provide adequate funding to NHTSA , and to
require NHTSA to develop a roadmap for itself and the States to
significantly reduce alcohol-related deaths and injuries. The Nation is
waiting for short-term, immediate strategies such as high-visibility
enforcement efforts and sobriety checkpoints to turn this trend around,
as well as long-term strategies that will ensure our safety on
America's roadways for years to come. Our Nation can no longer afford
the current state of inaction on this issue.
Today, we are at a historic crossroads as Congress takes up the
multi-billion dollar reauthorization of TEA-21 that will shape
transportation policy for the rest of this decade and beyond.
Maintaining the status quo, or worse, decreasing resources dedicated to
fighting drunk driving will not reverse this deadly trend. This is our
best chance to ensure adequate highway safety funding, to ensure that
these funds are being used effectively, and to enact laws that will
keep drunk drivers from getting behind the wheel. I urge Congress to
adopt MADD's proposal and create safer roads for all Americans. Thank
you.
Senator Campbell. Thank you. Mr. Hurley.
STATEMENT OF CHARLES HURLEY, VICE PRESIDENT, NATIONAL
SAFETY COUNCIL
Mr. Hurley. Thank you, Senators. I am Chuck Hurley, Vice
President of the National Safety Council's Transportation
Safety Group and Executive Director of the Airbag and Seatbelt
Safety Campaign.
Much of the recent progress in highway safety is a direct
result of the leadership of this committee. Chairman Shelby's
support of ``Click It or Ticket'', Senator Murray's support of
``Click It or Ticket'', and the support that the committee has
given to paid ads has been instrumental. In fact, people are
alive across this country because of the work the committee has
done in recent years. Other States certainly on the committee
are also involved in this progress.
Regarding the administration, we want to applaud the
administration's focus on belt use, and specifically the $100
million fund that Dr. Runge, we give him credit for getting
that in the budget. We believe that that will entice a number
of more States.
I am proud to say, and Senator Durbin will probably say
when he gets here, that Illinois this week became the 19th
State plus the District of Columbia and Puerto Rico to get a
primary belt law. That makes right at 59 percent of the
population of the United States covered by belt law, which is a
good start. We need to get that to 100 percent.
Again, to emphasize how important belt use is, if we could
get the country to where Washington State has proven we can
go--and as Dr. Runge said, the other Western States and Puerto
Rico as well--we could save upwards of 4,000 lives a year by
getting belt use up to the level of most developed countries in
the world.
Belt use and drunk driving are not just two other highway
safety priorities. They are fundamental to the progress we hope
to achieve.
I would also like to commend the performance of the Federal
Motor Carrier Safety Administration for its 4-year record of
reductions, the 3.5 percent reduction I think in fatalities
since last year, and also the provisions for traffic records
and data collection in the budget as well.
Regarding MADD, the Nation owes MADD an extraordinary debt
of gratitude. I have been with the National Safety Council a
long time, have lobbied the U.S. Senate before MADD. Senator
Pell introduced a bill in the late 1970's, a very modest bill,
got no hearing whatsoever.
With MADD's first national press conference in October,
1980 things began to change. Without MADD, we would not have
had President Reagan's Drunk Driving Commission. We would not
have had a drinking age of 21. We would not have had most
administrative license revocation laws. We would not have had
the .08 law. And we probably would still be losing 27,000 lives
a year. Equally importantly, the victims of this violent crime
would have no place to turn. So, again MADD is owed an
extraordinary debt of gratitude.
Regarding law enforcement, it is hard to overstate the role
that they play in highway safety. I know a number of us, Wendy
and I, really consider law enforcement to be every day heroes.
Out there all day long, late at night, stopping people not
knowing what is in that car. A good example was this week at
the checkpoint and the launch here in the District of ``Click
It or Ticket'', where at 10:00 in the morning they stopped a
suspected drunk driver on Nebraska Avenue that was so drunk at
10:00 in the morning that he passed out and was taken away in
an ambulance.
The work law enforcement does every day is extraordinary.
We ask them to do some of our toughest jobs, but none tougher
than pulling kids out of cars and knocking on doors late at
night. A number of them have said that they would rather give
out 1,000 tickets than have to do that again.
Regarding the budget, we at the National Safety Council
have a sincere concern that the budget in key areas is simply
not adequate. Wendy Hamilton of MADD raised the issue of the
paid ads. That is critical, I think, to make further progress
in this country on both belts and alcohol. The fact that it is
not in the budget is very concerning to us.
It has been said that people who admire law and sausage
have watched neither being made. The same probably extends to
budgets. I am not sure how it was not put in the budget but we
hope that this committee will put it back.
We also are concerned, again, that there is simply not
enough funding for drunk driving efforts. As Wendy Hamilton
indicated, for the proposed funding to be higher for
recreational trails than for drunk driving programs in this
country to us makes no sense whatsoever and we hope this
committee will seek to address that.
In the exhibits attached to my statement we have tried, at
the Airbag and Seatbelt Safety Campaign to put what has proven
to work into your hands in exhibits. We hope that that will be
made a part of the record.
The one exhibit I would like to draw your attention to is
one of our favorite charts. This is exhibit D, I believe. It is
on the left-hand side, the last attachment on the left-hand
side. It shows how important paid advertising is and how
important high visibility enforcement is.
You can see with the green line of serious and fatal
covered injuries and the red line of observed driver belt use
in North Carolina, where Dr. Runge and I would like to be, you
can see that real progress began really with the Operation
Buckle Down Program. As you drive belt use over 80, the serious
and fatal injuries drop very substantially.
At 75 percent we have virtually every low risk driver in
the Nation buckled up. But that is a daytime rate. That is when
belt use is observed.
In contrast to that, the high risk drivers, specifically
teenagers, their belt use in fatal crashes is only 36 percent.
The belt use their teen passengers is only 23 percent. And it
is not really until you get to high visibility enforcement that
you do pick up the high risk drivers.
In addition, in North Carolina the Booze It and Lose It
Program was able, through highly visible enforcement and paid
ads, just as we are recommending to the committee, that took an
already good program in North Carolina and cut the rate of
intoxicated drivers at nighttime checkpoints in half.
High visibility enforcement works. We strongly support its
inclusion in the budget.
If Senator Durbin were here I am sure he would want to also
point out that with Illinois' enactment of the primary belt law
this week that they are looking very much forward to the
administration's proposal where they would qualify for a
maximum grant of $31,280,000. I believe they would be the first
success story of this proposal. We would strongly support any
effort to get Illinois that money.
They also passed probably the Nation's best racial
profiling law, a booster seat bill, a passenger restriction on
graduated licensing intermediate stage drivers as well, and
have really become a model for the Nation.
PREPARED STATEMENT
Finally, I would like to thank the funders of the campaign,
without whom our work would not be possible, the automobile
manufacturers, the airbag suppliers and one major insurer.
We would, I think, all be delighted to respond to questions
that the Senators might have. Thank you.
[The statement follows:]
Prepared Statement of Charles Hurley
Mr. Chairman and members of the Subcommittee, thank you for
inviting us to testify before you about a very important issue, highway
safety. I am Chuck Hurley, Vice President of the Transportation Safety
Group at the National Safety Council and Executive Director of its Air
Bag & Seat Belt Safety Campaign.
Allow me to express our thanks for the leadership of the
Subcommittee--Senators Shelby and Murray--for the support you have
provided for the efforts of NHTSA and the Campaign to increase seat
belt use. The resources you have made available have helped to save
lives and prevent injuries.
HISTORY/CAMPAIGN'S PHILOSOPHY
In July 1996, an alarming trend was emerging: people--most of them
children--were being killed by air bags. Pressure to overturn the
mandate for driver and passenger side air bags--proven life savers for
properly restrained adults--was mounting. As one million new passenger
air bag equipped vehicles entered the fleet every month, a coalition of
interested parties, primarily funded by the auto manufacturers, formed
what is now the Air Bag & Seat Belt Safety Campaign, which celebrated
its seventh anniversary yesterday.
Our goal was to save lives by informing the public of the steps
they could take to maximize the benefits and minimize the risks of air
bags, and to increase seat belt use. A close examination of the child
air bag fatalities revealed a chilling trend--these children were
almost all unbuckled or incorrectly restrained in the front seat.
Seat belt use is the key to maximizing the lifesaving benefits of
air bags and to reducing the staggering number of people killed and
injured in crashes every year. The Campaign is focused on increasing
seat belt and child safety seat use in addition to continuing to
promote air bag safety. The Campaign's work is grounded on a
fundamental principle--to employ only strategies tested and proven to
work. As such, communications are used to support interventions proven
effective in getting people to buckle up.
At recent and current levels of belt use, the only interventions
proven effective in significantly increasing seat belt and child
restraint use are strong laws and highly visible enforcement. The three
key elements of the Campaign's strategy are to enact strong safety belt
laws, enforce those laws to the fullest extent of the law and to
educate the public.
PRIMARY BELT LAWS
Achieving the country's current 75 percent belt use rate has been
remarkable considering that we are building on a foundation of weak
State seat belt laws. Only 18 States and the District of Columbia have
strong, primary enforcement laws which allow a vehicle to be stopped
and the driver and/or passengers ticketed solely for not wearing a
safety belt. Secondary laws, which require the vehicle to be stopped
for another violation before issuing a seat belt ticket, are more
suggestions than they are laws.
The Campaign has been active in 25 States pursuing stronger seat
belt laws with successes in seven States. We have been involved with
every State that has passed a primary enforcement law since 1997. When
we started, 37.5 percent of the U.S. population was covered by primary
laws. Today, that figure stands at 54 percent. This increase represents
an additional 51 million people now covered by these lifesaving
measures.
ENFORCEMENT MOBILIZATIONS
The centerpiece of the Campaign is the Click it or Ticket
Mobilization--a twice yearly, 50-State seat belt and child passenger
safety enforcement drive. The Mobilization is sponsored by the Campaign
in partnership with the National Highway Traffic Safety Administration,
the National Transportation Safety Board, the International Association
of Chiefs of Police, Mothers Against Drunk Driving, the National
Sheriffs Association, the National Organization of Black Law
Enforcement Executives and with the support of more than 1,000
businesses and community organizations.
Just last week, we were delighted to be joined by so many members
of the Administration, including Transportation Secretary Norman
Mineta, NHTSA Administrator Jeff Runge, M.D., and Surgeon General
Richard Carmona, M.D., as we kicked off the Click it or Ticket
Mobilization. This is the first Mobilization to be supported by
significant national and State advertising, with funding sponsored by
the leadership of this Subcommittee.
The Click it or Ticket enforcement push runs from May 19 to June 1.
During the Mobilization, the message to teens and young adults--in the
TV and radio ads, in schools, in internet chat rooms, and at
enforcement zones near where young people congregate--is to use a seat
belt or risk getting a ticket.
The purpose is not to give out more tickets, it is to increase belt
use, save lives, and prevent injuries.
The Click it or Ticket Mobilization replicates a highly effective
seat belt enforcement example that is based on a model developed in
Canada where high visibility enforcement has resulted in belt use rates
that exceed 90 percent.
The first statewide implementation of the Click it or Ticket model,
including paid advertisements that supported the enforcement, came in
North Carolina in 1993. Belt use immediately jumped 15 percentage
points in three weeks and remains above 80 percent in the State. This
sTEP (selective Traffic Enforcement Program) model combines periodic
waves of stepped up enforcement of seat belt and child passenger safety
laws with aggressive publicity highlighting the enforcement. The
program aims to deliver the message that law enforcement will be
ticketing seat belt and child passenger safety law violators.
The Air Bag & Seat Belt Safety Campaign created the first
nationwide Mobilization in May 1997, with 1,000 law enforcement
agencies from all 50 States participating. Now, after 12 Mobilizations,
the number of participating agencies has climbed to more than 12,500,
representing hundreds of thousands of law enforcement officers
nationwide, and reaching 99 percent of the U.S. population.
The fact that there continues to be such strong participation and
leadership from our Nation's law enforcement in the Mobilizations is a
clear demonstration of their commitment to saving lives. We ask our
police to do the toughest jobs, but none tougher than pulling dead
children out of vehicles, and knocking on doors late at night to inform
family members they've lost a loved one to a traffic crash. We are
honored to work with police throughout the year, but especially during
these Mobilizations.
In the 6 years since the Mobilizations began:
--Child fatalities from traffic crashes have dropped by 20 percent.
--Restraint use among toddlers has jumped dramatically from 60 to 94
percent and among infants, ages 0-1 from 85 to 99 percent.
Restraint use for children ages 4 to 7 is 83 percent.
--Adult seat belt use has risen from 61 percent to 75 percent--the
highest use rate ever--with 39 million more Americans buckling
up.
--The rate of child-related airbag fatalities has declined 94
percent.
SUCCESS OF PAID ADVERTISING
In the early days of the Mobilizations, there was a heavy emphasis
on earned media. Working with others, we were able to generate
extensive coverage about the job that our law enforcement was doing to
ensure our safety. However, it became evident to us that to continue to
achieve gains in national seat belt use rates, the element of paid
advertising needed to be added to the equation.
Young people in particular are least likely to buckle up and least
likely to be impacted by earned media because they tend to not watch or
read the news. To reach them with an enforcement message (research
shows that those who refuse to buckle up are likely to change their
behavior with the threat of a ticket and not from a public education
message), we needed paid advertising to assure targeted messaging. By
targeting paid advertisements to their demographic, we directly let
them know that if they won't buckle up to save their lives, they should
do so to avoid a ticket.
In May 2001, high-visibility enforcement was coupled with paid
advertising in eight southeastern States with remarkable success. The
Campaign partnered with NHTSA's Region IV office in Atlanta to
implement the first multi-state seat belt use enforcement program. The
Campaign invested $500,000 in paid advertisements throughout the region
as the individual States purchased an additional $3.25 million worth of
paid media.
As a result of this program, safety belt use increased in the
region by nine percentage points. Sustaining belt use at that rate
would have produced a savings of 650 lives and $950 million in economic
costs. This increase represented an additional 4.5 million people
buckling up!
The success of Region IV was followed up with an additional 12-
State pilot program in May 2002. With the assistance of this
Subcommittee, $8 million was earmarked in NHTSA's budget to expand on
previous successes and determine if the program would work in other
parts of the country.
Once again, the program worked and lives were saved. While there
were 12 States that received specific funding through the earmark,
additional States also participated in high-visibility enforcement
activities with their own funds. In total, 23 States and the District
of Columbia used the Click it or Ticket slogan with paid
advertisements. Another 14 States used a non-Click it or Ticket slogan
with paid advertisements.
With so many States implementing varying programs, NHTSA was able
to extensively evaluate the effectiveness of these projects. States
that fully implemented the Click it or Ticket model with paid
advertising saw an average increase of 8.6 percentage points in seat
belt use. That was compared to States that diverged slightly from the
model, with some paid advertising and States that diverged from full
implementation with no paid advertising. The latter two categories of
States saw an increase in belt use of 2.7 percentage points and 0.5
percentage points, respectively.
Congress followed up this past February with another earmark to
support the Mobilization that is happening right now across the
country. In the Omnibus fiscal year 2003 Appropriations bill, $10
million was earmarked for a national paid advertising campaign to
support the current seat belt Mobilization.
Through the leadership of this Subcommittee, as well as other
groups like MADD, this same strategy has been extended to include
impaired driving mobilizations. We are pleased to be able to partner
with MADD in our mutual goal of reducing fatalities through enforcement
strategies that are proven to work.
The Campaign continues to believe that paid advertising is an
essential element in the national effort to increase existing belt use
rates. Research has shown that further educational appeals to non-belt
users will produce little or no change in behavior.
The 2001 Report of a National Seat Belt Summit, a gathering of more
than 45 national leaders in early 2001, concluded the following:
``Catchy slogans and public service campaigns alone are not the answer.
Public policies must support strong State belt-use laws, encourage
effective enforcement of those laws, and provide the resources
necessary to carry out these activities.'' The Report called for
expansion of ``highly visible and effective enforcement programs,
supported by coordinated paid advertising . . .''
MOVING FORWARD
Given all of the data that is available, we request that the
Subcommittee continue to earmark substantial funding to purchase
national and State paid advertising to support three Mobilizations in
fiscal year 2004. By providing funding to purchase national paid media
the country can take the necessary steps to achieve the goals of higher
seat belt use, and improved traffic safety.
We are still studying the Administration's highway reauthorization
and funding proposals. We applaud the Administration's emphasis on seat
belt use and primary seat belt use laws. We specifically support the
$100 million in incentive grants to States that have or will enact
primary belt use laws.
On behalf of the National Safety Council, let me state that we do
not believe there is adequate funding in the Administration's
reauthorization proposal for drunk driving or the other important state
highway safety programs.
Thank you, Mr. Chairman, and I would be pleased to respond to any
questions the Subcommittee might have.
[Clerk's note.--Attachments to Mr. Hurley's prepared
statement will be retained in subcommittee files.]
Senator Campbell. Thank you. I have a few and I am going to
bounce around a little bit here. Maybe I will just go ahead,
since you were the last one who spoke, Mr. Hurley.
You mentioned some of the highway funding going to perhaps
other things. What is your view on transportation money,
highway money, going to bike trails and hiking trails and so
on?
Mr. Hurley. We support that obviously, and we also support
the safety-related construction. It does save lives. But most
of the SAFETEA road construction would see benefits over a 20-
to 30-year period.
As Wendy Hamilton of MADD has said, if we want to reduce
the FARS right now, the best way to do it is the things that
are recommended in high visibility enforcement. It is an
unfortunate fact that priorities do have to compete in the
highway bill. But for recreational trails to be funded at a
higher level than drunk driving, we think, is a hugely
misplaced set of priorities.
Senator Campbell. Thank you.
As you know, we went from a huge surplus in just about 20
months now to who knows, maybe a $350 billion deficit in the
next 10 years. I think a lot of things are going to be in
competition for the existing dollars, as you probably know.
Ms. Sandberg, did I hear you say there are 800,000
shipments of HAZMAT a day in the United States?
Ms. Sandberg. Yes, sir.
Senator Campbell. Do you have a figure for the number that
are involved in accidents?
Ms. Sandberg. I do not have that, but I can get it for the
record.
[The information follows:]
Only 15-20 trucks transporting hazardous materials are involved in
an accident each day. In the majority of these crashes (84 percent),
there is no leakage of hazardous materials.
Senator Campbell. If you would supply that I would
appreciate it. I was one person that was not thrilled at all
about the movement of the hazardous material to Yucca, Nevada.
One of the reasons was a lot of it was going to go through the
city in my State which is Denver, or on rail down what is
called Glenwood Canyon besides a river that supplies something
like seven States. It is part of the Colorado system. We were
really concerned about that. I would be interested in knowing
that number.
Let me skip to maybe something else now and I will probably
get in trouble for bringing this up, but the Federal Motor
Carrier Safety Administration is reviewing and about to change
their hours of service proposal. I am not sure if we have got
the availability of resources to carry at the rulemaking and to
conduct what the Congress has mandated. Would either one of you
like to, Dr. Runge or Ms. Sandberg, like to comment on that?
Ms. Sandberg. The changes in the hours of service rule?
Senator Campbell. Yes.
Ms. Sandberg. Yes. Actually, we recently made those changes
after a number of years of deliberation. Actually, we had over
53,000 comments.
The changes in the rules, in working with our partners at
the States who do most of the enforcement, the main group is
the Commercial Vehicle Safety Alliance, has indicated that they
feel that the new rules are going to be easier to enforce
because they move truck drivers more towards a 24-hour clock.
What it requires is that driver have 10 hours off. They can
work 14 consecutive hours. Once they go on the clock, those
hours start consecutively so that they cannot take breaks and
build their work day into 20 or 24 work days.
Senator Campbell. They can work 14, but not drive 14.
Ms. Sandberg. No, they are only allowed to drive 11 of that
14. So that moves them more towards a 24-hour clock, which
helps law enforcement look at their log books and determine
exactly how much they have been working and able to enforcement
that.
We also have a follow-on rulemaking that will occur within
the next year or so which is to shore up one of the areas that
has been a concern of the enforcement community, and that is
the documents that drivers are required to keep as part of
their log book. So that it shows restaurant receipts and those
kinds of things.
So we are working on trying to shore up the areas where
enforcement has told us that there are some concerns.
Senator Campbell. I never was a supporter of that, either.
You probably know that. I do not know if you have ever driven
much in the 18-wheelers, but I have. And I can tell, knowing
from some people who have done it, that faking log books is not
all that difficult. It has been done for years. Even before
there was log books there were things called clocks that they
used to keep. Not difficult at all to fake those things.
So I hope it works. I know the ATA is supporting these rule
changes, the American Trucking Association. But all I hear from
drivers themselves is that it is going to be bad. It is going
to really cut into their ability to make a living. It is going
to clog the highways with more trucks that have to make up the
shipping for the ones that have to be parked.
I have heard it from truck stop owners, literally all kinds
of people thinking that the hours of service are going to be
more detrimental than helpful. I hope they will be helpful.
But there is something else that has been on my mind
lately. And this is probably where I am going to get in trouble
with AARP and a few other senior groups. That is the way the
regs work now, if you have a truck that is over 26,000 pounds
gross vehicle weight you have to have a license. You have to
have a CDL, different levels.
But there are vehicles out there, big RVs, 45 feet long.
They can go legal limit now 45 feet. Some of them gross 40,000
pounds. That is big vehicle. And they can tow a 20-foot
trailer, too. And a lot of the people that are buying those
great big beautiful motor homes, that are very expensive as you
might guess, are people that summer where it is nice in the
summer and they go where it is nice in the winter. That means
they are going back and forth twice a year from Wisconsin to
Florida or from maybe Oregon to Yuma, Arizona, where there are
thousands upon thousands of RVs every winter.
I guess the good news of that is that they are only driving
it twice a year. But that is also the bad news, they are only
driving it twice a year. Because these vehicles are much bigger
than most of the lower levels of the guys who have to have CDLs
that are professional drivers and have to go through training
and do all this other stuff, I am wondering what your reaction
is to the view, at least in some circles, the people that drive
these great big RVs ought to also be required to have some kind
of training or special licenses, because they have got air
brakes, they have got diesel engines, they have everything that
the tracks have on them. And yet they do not have to comply
with anything.
Ms. Sandberg. We have not, at the Motor Carrier
Administration, specifically looked at requiring commercial
drivers licenses for these types of vehicles. Right now our
focus has been on commercial motor vehicles, which is trucks
and buses.
Senator Campbell. They are not going to be commercial
drivers. They do not haul anything except their family and
their toys. But I am thinking from a safety standpoint and a
training standpoint because a lot of them--one thing about the
truck drivers, they are out there 8 or 10 hours a day driving
the things. But the people during the big RVs are not. They
drive them from A to B and then they park them for months.
Ms. Sandberg. Clearly from a training standpoint, and I
will have to put on my NHTSA hat here from when I was over at
NHTSA, one of the things that we always looked at is that any
time somebody moves to a different type of vehicle, they should
have some type of training. I think we were speaking before the
hearing about people that buy a motorcycle and how helpful it
is if they have some motorcycle training before they get on
that motorcycle.
The same with some of the training regimes that we have
worked on in NHTSA with States to look at young drivers and
making sure that they are appropriately trained before they get
behind the wheel of that car, whether it be through graduated
drivers license programs or other types of education.
I am not aware of any studies looking specifically at RVs
and drivers that have not driven that large of a vehicle
before.
MOTORCYCLE FATALITIES
Senator Campbell. From a legislative standpoint, there is
the low of possibility and the law of probability. It is
possible we could make some kind of a law or rule about
training but the probability, knowing what kind of a buzz saw
that would cause with the senior groups, it is probably not
going to happen. But it is just something for thought.
Since you brought up something that is of particular
interest to me, as you know, and that is motorcycles and
motorcycle safety, I read recently that the number of deaths on
motorcycles has gone up quite a bit in this last year. Have you
done, Dr. Runge, studies on who it is that is dying? Age group,
training, something along that nature.
Dr. Runge. Yes, Senator Campbell. As a matter of fact, when
we look at the increase in deaths on the highways over the last
year, a goodly proportion of that increase was due to an
increase in motorcycle fatalities. Fortunately, this past year
the increase has dampened a bit, but we still saw about a 3
percent increase in motorcycle fatalities year to year. As you
suggest, the largest number of those is in the 50- to 59-year-
old age group.
However, we still have a tremendous problem with impaired
riding. Although just under 40 percent of motorcycle crashes
are alcohol-related, it should be pointed out that even at
lower levels of alcohol, riding a motorcycle becomes more
difficult. I think there are right brain functions, activities
that are second nature to a rider, such as handling a curve and
looking peripherally, that do not do well.
Senator Campbell. People who drive automobiles and drinking
are impaired. People to drive motorcycles and drink are just
plain crazy.
Dr. Runge. Thank you for pointing that out.
We are addressing this. We do have a $656,000 request in
the fiscal year 2004 budget particularly related to programs
for motorcycle riders. We are interested in training. We just
developed a motorcycle safety plan, which I hope you have had a
chance to take a look at, that we sent over in December. We
would like to begin to implement the recommendations in that
plan in the coming fiscal year.
This is an area where our stakeholders and our customers
have very strong feelings about what should be done. We
developed our plan in concert with them. We hope that kind of
collaboration can continue.
HIGH VISIBILITY ENFORCEMENT FOR IMPAIRED DRIVING
Senator Campbell. In my view, the education and training
certainly is more acceptable than more and more penalties which
sometimes work and sometimes do not. We talk about alcohol-
related crashes. My dad was an alcoholic. And over the years, I
came to believe that all that tragedy and stuff that alcoholism
causes, it is a form of sickness. Sometimes more and more
penalties do not stop a person that has a sickness. They do it
anyway.
I might also note with interest that the people who are
dying, the highest percent that are dying on motorcycles now
are the 50 to 60, you said. It would be my guess they were
people who did not ride their whole life. Mom said they could
not have one when they were young. Now mom is gone and they
have got some money. And they saw that movie, Easy Rider, and
they know they can do it. And they are too macho to take any
dang training and so they have got to get on there and they buy
some hundred thousand dollar killer and get out there and get
hurt. But thank you for those numbers.
I think I had one other question before I ask Senator
DeWine for his input. This ``Click It or Ticket'' campaign that
was talked about, considering that has been rather successful,
is there anything in the wind or being suggested that we might
use something along that line for impaired driving or alcohol-
related accidents?
Dr. Runge. Yes, sir, we currently do that. In fact, Mr.
Hurley and Ms. Hamilton have gone on record as supporting high
visibility enforcement with us. Mr. Hurley mentioned the
``Booze It & Lose It'' campaign that was successful in North
Carolina.
This committee, in fact, appropriated right around $10
million for a high visibility national advertising campaign
this year, which we will kick off in about 4 weeks. In the
alcohol area, we want to replicate those successes that have
been achieved with seatbelts.
EMERGENCY VEHICLE SENSORS
Senator Campbell. Thank you. Maybe one last question, and
you might not have an answer to this because it came to me kind
of accidentally.
There are so many noises out there driving now,
distractions and noises. Radios, soundproof cars to drown out
some of those noises, and older drivers that may have some
hearing problems. I was recently told about a sensor that has
been developed that can be put in commercial vehicles or
personal vehicles that indicate when an emergency vehicle is
near. I did not know how it senses it.
I was thinking, you know, we have got those things that you
put on your bumper where deer can sense that you are near
through some kind of a sound they can hear. So maybe it is
related to that.
Are you aware of any kind of a pilot program that is being
developed? I heard of one that is being developed in Colorado,
by the way, in Summit County. A program is being developed that
would tell you if police cars are coming? And I do not mean
radar units. Something to keep you out of trouble.
Dr. Runge. I am not aware of that, but we will be happy to
check into it and get back to you.
[The information follows:]
Emergency Vehicle Crash Avoidance Technologies
According to NHTSA statistics, in 1997 approximately 15,000
emergency vehicles were involved in traffic crashes, 75 percent of
which are attributable to the other driver not yielding to the
emergency vehicle. For emergency vehicles to safely respond to calls,
they need systems that attract the attention of other drivers and
elicit an appropriate response, specifically creating a clear path
through which the emergency vehicle can travel. To accomplish this
goal, many organizations operate sirens when responding to critical
situations. However, with enhanced soundproofing in vehicles and
increased capabilities of in-vehicle sound systems, there is newfound
concern that sirens are not heard, thereby contributing to crashes with
emergency vehicles.
To remedy this issue, numerous inventors have developed
technologies to provide enhanced information of emergency vehicle
travel to other drivers. These devices are probably similar to the one
being tested in Colorado. Some systems use wireless transmitters to
send warning signals from the emergency vehicle to a transmitter in
vehicles nearby. Other systems use acoustic sensors to pick up sirens
and amplify them inside the vehicle. For example, Safety Cast, consists
of a mobile transmitter designed to broadcast messages from emergency
vehicles to other vehicles in the area. The Safety Cast consists of a
two-mode alert: a tone followed by a message detailing the situation.
Promoters of the product state that with this design drivers will be
able, ``. . . to make a much more planned and safer decision on how to
respond'' to emergency vehicles.\1\ Another recent design, the
Emergency Vehicle Early Warning Safety Systems (E-Views),\2\ delivers
directional information of emergency vehicle location with signs
mounted on traffic signal mast arms. The Keio University in Japan has
also designed a siren detection system that provides warning
information to drivers when an external microphone detects sirens.
(These systems operate on a different principle than air-fed deer
whistles which were mentioned in the Congressional question. Contrary
to popular beliefs, a recent study from the University of Connecticut
found the whistles to be ``acoustically ineffective.'' \3\)
---------------------------------------------------------------------------
\1\ More information is available at www.mysafetycase.com.
\2\ More information is available at www.eviewsinc.com.
\3\ Palmer, J. ``Air-fed Deer Whistles Scientifically Tested.''
UConn News, University of Connecticut Office of University
Communications, November 19, 2002.
---------------------------------------------------------------------------
Previous NHTSA research found that the costs of achieving effective
in-vehicle emergency vehicle warning systems far outweighed the
benefits.\4\ The systems need to overcome significant technical hurdles
to make the devices reliable under harsh driving environments and to
minimize presenting drivers with distracting or annoying false alarms.
However, advancing in-vehicle technology could prove to make such
interventions cost-effective. In order to determine effectiveness,
extensive research would need to address the following issues:
---------------------------------------------------------------------------
\4\ Peterson, D.D. and Boyer, D.S. (1975). ``Feasibility Study of
In-vehicle Warning Systems.'' DOT HS-801 569.
---------------------------------------------------------------------------
--System compatibility with all sirens implemented in the United
States;
--Infrastructure requirements;
--Interface design, intended to not only gains the attention of
drivers but promotes the most appropriate response;
--Maintenance requirements and system reliability;
--System state requirements, e.g., does the driver need to have the
radio on, etc.
Senator Campbell. Thank you. I have no further questions.
Senator DeWine, did you have some questions?
Senator DeWine. Mr. Chairman, thank you very much. Let me
first just say that I am sure that Chairman Campbell would not
charge you anything for his great quote about those who drink
and ride motorcycles, if you want to use that. You would not
charge them anything would you, Senator, about your great quote
about those who drink and drive motorcycles? They could
probably use that.
Senator Campbell. Yes, you can use it. They are either
crazy or suicidal.
BUDGET REDUCTIONS IN IMPAIRED DRIVING PROGRAM
Senator DeWine. I think that is a great quote.
Doctor, let me ask you, we have talked about the cuts in
the alcohol programs. They cut, I believe, $110 million in the
safety incentives to prevent operation of motor vehicles by
intoxicated persons, Section 163, $40 million cut in the
alcohol impaired driving countermeasures incentive grants. We
have talked a little bit about those.
But you are not saying that those are not effective
programs, are you?
Dr. Runge. If I could just frame this issue, Senator
DeWine, this is one of these unfortunate issues of timing where
we have reauthorization, and the budget moving through
simultaneously. But, it is worth reflecting on the philosophy
behind this reauthorization. Those monies that you just spoke
of were formerly in the Federal Highway Administration's
budget, but were administered by NHTSA.
What we are trying to do with reauthorization is to put the
responsibility where it belongs, and the ability to deal with
it where it belongs. And that is in the States.
The State alcohol-related fatality rates go from a low of
0.29 fatalities per 100 million vehicle miles traveled in Utah
to 1.27, 3\1/2\ times that much, in South Carolina. We have, in
the past, painted a very broad brush across this entire
country. That has not been shown to be effective. There are
pockets in this country where it is very dangerous to drive.
The reauthorization proposal brings the funds that formerly
were in the Federal Highway Administration budget over to NHTSA
in a combined 402 program that gets the money into the States
with performance incentives. That is, the State's goals will be
aligned with the national goals. In order to qualify for
incentive funds, States will need to implement programs with
their money--and the same money is there, it is level funded--
they will have to apply those funds, instead of buying key
chains and bobble-headed dolls. They will have to spend money
where it belongs, which is in high-visibility enforcement and
in dealing with the repeat offender and the chronic alcohol-
user who gets behind the wheel of a car.
That is the philosophy behind this, and that is the basis
of our fiscal year 2004 budget proposal.
Over the course of 6 years, there is a decrease in the
funding that is specifically for alcohol from about $14.7
million to right around $11 million. However, that does not
include the 402 funds that are still there, which we want to be
applied to tackle the problem.
We are setting up incentives that will require States to do
that, and giving them best practices which you all have paid
for. We know what works. We know what is there. Getting the
States to do it is a real challenge.
In Tennessee, they reduced alcohol fatalities with a
double-digit effectiveness with ``Checkpoint Tennessee''. But,
when the money went away, that money that you are speaking of,
the program went away. That cannot happen anymore. We have got
to hold States accountable for the money that they spend on
these issues.
REAUTHORIZATION PROPOSAL EFFECT ON IMPAIRED DRIVING PROGRAM
Senator DeWine. I want to make sure I understand, and I am
going to take some more time to study your proposal. I have
looked at it already, but we are not going to resolve this
obviously today. I will be in contact with you personally about
this. But I want to make sure I initially understand what you
are telling me.
You are not telling me that you are transferring money away
from this overall anti-drunk driving prevention or education
program. Is that what you are telling me?
Dr. Runge. That is correct. What we have done with
reauthorization is to take seven or eight different grant
programs and combine them into a single 402 program. Plus, we
added a $50 million program that is specifically for alcohol
programs in those States with the worst impaired driving
problems. That $50 million is not meant to be spread all over
the entire country.
There are 12 States that, if they just got themselves to
the national average, the result would be that we would be 80
percent of the way to our goal. We have got to get into those
States and, first of all, evaluate them, find out what is going
on in there, and then give them some special resources to pull
themselves up by their boot straps, because right now, what we
are doing is not working.
That is the $50 million program that is being talked about.
The rest of the grant programs are in a combined 402 program,
with a level-funded formula program, as well as a well-funded
incentive piece on top of that, so that States who meet those
goals can get additional resources.
Senator DeWine. Would anybody on the panel like to comment
on that? Mr. Hurley or Ms. Hamilton?
Ms. Hamilton. We have information that we will be happy to
submit to the panel. The highway safety performance grant--
there are three pockets of money. The State and community
grants, the 402, is $162 million. That is down $3 million from
the year before. That is a loss in funding.
There is performance grants of $175 million, which can be
given to the States to be used on alcohol-impaired
countermeasures, but it gives the States the option of using
that money for highway safety improvement programs.
As we saw from the GAO report, that is what happened in the
majority of the times in the previous program where they were
allowed to use that money for hazard elimination. It is just
the same thing, a new game, and basically a shell game.
Again, previously in TEA-21, there was $150 million that
went to the States each year to deal with impaired driving
programs. It is only $50 million now. That is $100 million
loss. And it is only going to 12 States.
There needs to be money. I agree with Dr. Runge, there are
States out there that it is more deadly to drive in than
others. They need to have funding to do it, using it on
effective research based programs that have shown to work and
save lives and prevent injuries. But they also need to provide
money to States so that they can sustain the level of
performance and perhaps benefit even more.
DIVERTING IMPAIRED DRIVING FUNDS
Senator DeWine. Doctor, what about the argument? And you
can argue whether or it is good policy or not. But is she
correct? Is Ms. Hamilton correct when she is saying that States
could actually, under your proposal, divert the money to
highway construction? You can argue that is good or bad, but is
that true?
Dr. Runge. The programs that she is talking about were
incentive grant programs for repeat offenders, and required
States to meet four or five criteria to receive funding. Those
funds can also be spent partly on road hazard elimination in
the States that meet those eligibility criteria.
Therefore, it should not change the ratio significantly.
Senator DeWine. You are saying they could do it before and
they can do it again?
Dr. Runge. That is right. Let me back up for a second and
talk about an underpinning of this program. Every State would
be required to submit a comprehensive highway safety plan under
the reauthorization proposal. The plan will have stakeholders
that will be defined by regulation, but it will be people like
MADD and law-enforcement, as well as the road builders and
others in the State DOT, who will, based on each State's data,
determine where their safety problems are.
There is no need for Utah to have largess for alcohol
programs. But there is a tremendous need for South Carolina,
Louisiana, Montana, South Dakota, Arizona, Wyoming, and others
with very high impaired driving-related fatality rates, to
devote significant portions to reducing impaired driving.
U.S. DOT will take it very seriously when a State submits a
comprehensive highway safety plan, whether or not the data
truly represent how they intend to spend their money. The
flexibility that we give States also enables them to spend a
good portion of their hazard elimination money on behavioral
programs if their State data indicates that it is needed.
We are putting a tremendous amount of eggs in the basket of
each State's traffic records and data improvement, which is why
we also have $50 million in our proposed fiscal year 2004
budget to help States shore up their State traffic data, so
that we can pinpoint where the problems are occurring.
STATE DATA ACCOUNTABILITY
Senator DeWine. Let me play off that for a moment. My home
State of Ohio has begun to do a pretty good job in listing the
most hazardous intersections and stretches of highway. We do it
statistically. We do it in ranking order. Some States are doing
that. Few States, based on my experience at least, in what I
have seen, are doing both a ranking and then putting their
money where their ranking is.
In past highway bills, we have paid lip service to that. We
have said oh, that is a good thing. You should do that. We have
not put much teeth behind that. And we have not insured, in the
highway bills, that significant money would go to that.
I would like your comments on that because I am very
interested, frankly, as we write a new highway bill, that we do
that. It seems to me that when we are talking about putting
highway dollars--I am beyond frankly what we are talking about
here today, but this is your area of highway safety--that what
we should be doing is figuring out where we can save the most
lives for the most dollars and at least taking part of the
general highway construction dollars and saying okay, we are
going to find the 50 or the 100 most dangerous places in
Indiana or Ohio our Maine, and let us go deal with them every
year. And let us figure out where we can get the most bang for
the buck or save most lives for the buck. But we have not
really been doing that consistently across the country.
Now what you are talking about doing it frankly is on a
fairly--with all due respect I think it is the right thing to
do--but it is on a fairly small dollar amount when we are
talking about the dollars we are dealing with here.
I am talking about doing it on big highway bill and doing
it with some serious dollars, I mean big dollars.
Do you want to comment on that? It seems to me that the
good news I am hearing from what you are saying is that the
studies you are talking about doing, and the $50 million you
are talking about doing, certainly is a start at least in
trying to compile the data that the States will need to be able
to come up with that information.
Dr. Runge. Thank you. I think you are exactly right.
In the past, there has been lip service played to
accountability. The A in SAFETEA is accountability.
A lot depends on a State's comprehensive highway safety
plan, and a lot depends on their ability to gather traffic data
and to acquire it in a way that is scientifically legitimate.
With respect to where those problems are, it may not just
be where, it is also the who, what, when, and where of the
issue, the whole epidemiology of the problem. Some States do a
great job of defining that. Low velocity highways with high
crash fatalities may not need road design. They may need just
higher seatbelt use and less impaired driving.
We will strive to make sure that those data are acquired
and that States are held accountable for that highway safety
plan.
Also, in the reauthorization bill there is a billion dollar
highway safety core program in Federal highways. A State's
share of that can be spent--100 percent of it can be spent on
data improvements if the State needs it. It can be spent on
hazard elimination. It can be spent on behavioral programs. It
can be spent on alcohol programs and belt programs.
We are trying to give States the flexibility to spend their
money where it needs to go. You are exactly right. A lot
depends on how we define that safety plan and how the U.S. DOT
is able to insist that the money be spent in a way that, in
fact, does address the highway safety problem.
I hope we have the committee's support for that
accountability.
FLEXIBILITY AND ACCOUNTABILITY
Senator DeWine. The key, it seems to me, we are all for
flexibility, but it is clear from your comments earlier you are
for flexibility but you are also for accountability.
Dr. Runge. Yes sir.
Senator DeWine. You talked about key chains and other
things that you do not seem to think amount to a whole lot, and
I would happen to agree with you.
I go back to my experience as Lieutenant Governor of Ohio,
and one of the areas where I was in charge was highway safety.
We looked at things that mattered and some things that frankly
did not matter.
So how we strike the right balance of allowing States to
pick and choose what is appropriate for their State but also
give them the guidance to move forward and to try to target
things that do, in fact, matter is the key I think.
Ms. Hamilton?
Ms. Hamilton. Senator, flexibility is important to the
States. We understand that they are struggling with this and
they are very concerned about MADD's proposal. However, we saw
in the past that that money is going for hazard elimination
programs.
What you talked about before, what is going to save the
most lives most quickly is, quite frankly, the bill that you
introduced today with Senator Lautenberg for enforcement on
belt and alcohol prevention programs to give law enforcement
the resources that they need for the next 6 years and the paid
advertising to let people know that impaired driving and
seatbelt usage is important.
We can build better roads. We can design safer cars. But
unless we develop safer drivers, we are not going to make any
kind of a dent in this problem. And we have got to take the
time right now to put the resources into behavioral safety
programs that we know are effective. We have 30 years of
research and data from NHTSA, from all over this country and
the world, in fact, that tells us what works, enforcement.
Senator DeWine. Mr. Chairman, if I could just make one
additional comment. I know I have gone over my time. But just
to make sure everyone understands at least this one Senator's
position.
I believe that the money we are talking about today,
frankly, should primarily be going for education issues and
behavioral modification issues and the things that Ms. Hamilton
is talking about.
The highway construction and the hazardous changes in
construction that I was talking about, I think, should come out
of the big bill that we are talking about, and the bill that
frankly we will be, I hope, writing later this year. I think a
bigger percentage of that bill should be absolutely dedicated
to focusing on trying to eliminate the hazards on the highway.
I think we do not put enough of that into targeting what
matters on our highways. And I think what the doctor is talking
about is it makes sense to spend some money to get the data and
allow every State to have some assistance to get the data to
make those intelligent decisions, but then take money out of
our big bill and focus that money on the things that really do,
in fact, matter.
Let us go into every State. Every State has got them. Every
State has got the dangerous intersections. Why in the world do
we keep waiting until we get the fifth or sixth fatality when
we know, and everyone in the community knows, this is a bad
intersection. Everyone in the community knows this is a bad
curve. Highway patrol can tell you. You go into the Xenia, Ohio
highway patrol post, they can tell you the bad intersections.
They can tell you where there is going to be a bad accident.
They can tell you it is going to come. Now when it is going to
come, but it is going to come.
Why do we wait? It is just absolutely crazy.
Mr. Hurley. Senator, first, I want to thank you for your
leadership on highway safety, your support for MADD, and
specifically your support for high visibility enforcement.
On the accountability issues, which is critical, and it is
a very complicated bill. We are still studying it. But it does
appear to be an overall flat funding of highway safety with
very serious concerns about reduced funding in key areas that
we have talked about.
We support the idea of performance partnerships with the
States of accountability and the rest of that. However, NHTSA,
without a change in the statute, gave up plan approval 4 or 5
years ago. The General Accounting Office report that Senator
Dorgan just asked for and received had some very serious
comments about that. I would hope that this could be a part of
the record, as well.
The best States probably do not need plan approval. The
worst States probably need more than plan approval. There has
to be a whole consideration of performance partnerships with
the States that really has not occurred yet. I am hopeful that
we can get into that with the leadership at DOT because the
current system does not seem to be working all that well. Thank
you.
Senator DeWine. Mr. Chairman, thank you very much.
Senator Campbell. Thank you.
ADDITIONAL COMMITTEE QUESTIONS
We have no further questions from the members that are
here. However, Senator Shelby does have some. Rather than
asking them for him and getting them all confused, I will
submit those to you in writing. If you could answer them in
writing.
And I think Senator Murray may also have some questions.
[The following questions were not asked at the hearing, but
were submitted to the Department and witnesses for response
subsequent to the hearing:]
Questions Submitted to the National Highway Traffic Safety
Administration
Questions Submitted by Senator Richard C. Shelby
Question. The positive effects of the ``Click It or Ticket''
mobilizations to increase seatbelt usage rates are undeniable.
According to NHTSA's evaluation, seatbelt usage increased by 8.6
percent. In the Omnibus Appropriations Act this Committee again set
aside funds for these mobilizations and directed NHTSA to expand this
approach to target alcohol-related driving, which we are all concerned
about. With the demonstrated success of the program, why isn't funding
specifically identified in your budget proposal to continue these
campaigns in 2004?
Answer. NHTSA intends to continue the ``Click It or Ticket'' and
``You Drink & Drive. You Lose.'' mobilizations in 2004 and beyond. For
the last 5 years, funding has been provided through the Sec. 157
Incentive/Innovative Grant Program, authorized under TEA-21. NHTSA
utilized most of the Innovative grant funds awarded to the States to
support the semi-annual mobilizations.
The momentum and commitment for the mobilizations reached an all
time high this year with 43 States, DC, and Puerto Rico adopting the
``Click It or Ticket'' model in May 2003. Early in 2003, the Agency
solicited input from the Governors Highway Safety Association and the
highway safety offices of the 50 States, the District of Columbia, and
Puerto Rico regarding their future plans to conduct the mobilizations.
The responses indicated a solid commitment to continue the
mobilizations through Section 402 apportionments or other funding
mechanisms. Thus, NHTSA did not specifically earmark grant funds to the
States for this purpose. The President's fiscal year 2004 budget
request rolls $112 million of what was Section 157 funding in fiscal
year 2004 into a consolidated Highway Safety Grant program. This
proposal is also reflected in SAFETEA, the administration's
reauthorization proposal. This proposal eases the grant administration
burden of the States while providing the same level of resources as
previously to fund these programs.
The Department's SAFETEA reauthorization proposal also includes
special performance-based incentive grant programs under Section 402 as
incentive for State progress in both reducing impaired driving and
increasing safety belt use.
Question. The Department's goal for highway-related fatalities in
2004 is 1.38 per 100 million vehicle miles traveled. The budget
indicates that the two major reasons for the lack of significant
progress in reducing overall highway-related fatalities can be directly
attributed to motorcycles and pedestrians. The budget, however, appears
to assume a steady rate among these groups and a necessity to focus on
passenger cars and light trucks. What specific actions will the
Department undertake to address and to reduce the number of fatalities
among motorcycles and pedestrians in particular?
Answer. NHTSA's fiscal year 2004 budget addresses the action items
in the NHTSA ``Motorcycle Safety Program'' document released in January
2003 and the ``National Agenda for Motorcycle Safety'' developed in
collaboration with motorcycle safety partners.
A new fiscal year 2004 initiative will address a concern that
motorcycle-training programs accommodate all those who seek training.
NHTSA plans to work with identified State rider education and training
programs to develop and implement long-range strategic plans to make
training available for all those who need it and in a timely fashion.
NHTSA will continue research on motorcycle lighting as a means to
improve motorcyclist conspicuity and will continue research on
motorcycle braking systems.
Additionally, NHTSA will: conduct research on crash avoidance
skills; conduct research on motorcyclists conspicuity; support projects
to reduce impaired riding by developing and testing activities that may
include peer-to-peer efforts, social norm models, enforcement efforts,
and motorcycle impoundment; and collect and analyze motorcycle crash,
injury, and fatality data and compare motorcyclists who successfully
completed formal rider training to those who have not to determine any
difference in crash involvement.
Pedestrian crashes are addressed through a combination of public
information, legislation, enforcement, engineering, and outreach
strategies. NHTSA will: fund competitive demonstration projects
designed to involve the law enforcement community to improve pedestrian
safety; develop a community guide to tackle the challenges of
implementing comprehensive pedestrian safety programs; explore the
feasibility of developing and disseminating a school crossing guard
curriculum; and develop community-level Safe Routes to School workshops
to increase pedestrian safety around schools.
NHTSA will also disseminate tools to encourage communities to
promote safe walking. Non-traditional partners, such as smart growth
coalitions or local government commissions, will be identified and
encouraged to incorporate pedestrian safety into their organizations'
missions. NHTSA will continue its partnership with the Federal Highway
Administration to incorporate infrastructure improvements with
behavioral safety principles.
Question. The NHTSA budget proposes a new initiative to award
discretionary grants to States to demonstrate the effectiveness of a
comprehensive approach to reducing impaired driving. Could you explain
how this program is different from the old program in terms of scope,
distribution of dollars and more importantly, how it is an improvement
over the old program?
Answer. The SAFETEA proposal would make $50 million available each
year for discretionary grants to a certain number of States with high
rates of alcohol-related fatalities and/or high total numbers of
alcohol-related fatalities. These discretionary grants would fund
programmatic activities specified by NHTSA and agreed to by the
recipient States. These activities would be of proven effectiveness,
e.g., well-publicized and high-intensity enforcement of impaired
driving violations. Thus, under the proposal, NHTSA would annually
direct $50 million to States with the greatest need for improvement in
the impaired driving arena, and would see to it that those States spend
the money in ways most likely to succeed in moving the impaired driving
numbers down.
Under TEA-21, the only State grant funds, which had to be spent on
impaired driving programs, were the Section 410 alcohol incentive grant
funds, which totaled $40 million in fiscal year 2003. The States that
received these funds already had good legislative and programmatic
infrastructure for combating impaired driving, because these laws and
programs were needed to qualify for funding. Additional funds were
awarded to States that enacted .08 BAC laws. However, these funds could
be spent on any highway construction or highway safety program, not
just impaired driving.
Additionally, of the $337 million that SAFETEA would provide in
Section 402 basic formula and performance grants in fiscal year 2004,
all but $25 million resulting from safety belt use rate performance
would be available for impaired driving programs if States choose to
allocate for that purpose. SAFETEA thus gives States great latitude in
directing resources to address priority problems, including impaired
driving.
HIGHWAY SAFETY INITIATIVES
Question. Dr. Runge, your opening statement says that NHTSA has
``pledged to solve the highway safety issues confronting this Nation.''
However, other than consolidating some grant programs and a new
accounting of other grant programs, I see no new, innovative programs
included in this budget or in reauthorization proposal that would
convince me that NHTSA is on the way to solving the highway safety
issues confronting this Nation.
What specifically in this budget is going to make significant
strides in improving safety?
Answer. The Department's reauthorization proposal offers more than
consolidation of grants. The two performance based grant programs, the
General Performance Grant Program and the Safety Belt Performance Grant
Program would encourage States to take actions on strengthening their
highway safety programs and implementing laws to increase safety belts
and to deter impaired driving. The proposal will also help States with
high alcohol-related fatalities receive much needed support to improve
their alcohol programs. The proposal calls for NHTSA to develop and
facilitate a coordinated and comprehensive EMS infrastructure by
designating NHTSA as the lead agency for EMS.
Another component of the reauthorization proposal is to conduct a
national motor vehicle crash causation survey. The survey will collect
much needed, real-world crash causation data to identify and understand
motor vehicle crash factors that are integral to developing crash-
preventing countermeasures. The proposal will also authorize NHTSA to
institute an International Cooperative Safety Program to exchange
research and educational programs that are beneficial to NHTSA in
carrying out its mandate to reduce motor vehicle injuries and
fatalities. Further, the proposal provides incentive grants to the
States to improve their traffic record data, which will benefit the
local, State, and Federal transportation-related agencies in
identifying their transportation safety problems and evaluating their
programs and countermeasures.
HIGHWAY SAFETY GRANT FUNDING LEVELS
Question. I am concerned that much of this ``increase'' in funding
for highway safety is merely the shifting of funds from Highways to
NHTSA. I have expressed this to the Secretary and still believe that we
need more information to conduct a proper analysis.
Dr. Runge, how much of NHTSA's increase is actually new money?
Answer. NHTSA's proposed total funding for grants to States in
fiscal year 2004 is $447 million. That is identical to the amount of
funds provided to the States under TEA-21 in fiscal year 2003.
SAFETY BELTS
Question. With respect to seat belt usage, Dr. Runge, you have
said, ``we have a model that works. For every 1 percent increase in
belt use, we get $800 million in economic costs saved, 2.8 million more
people buckling up, 276 lives saved, and reduce the severity of 6,400
moderate to critical injuries.''
Dr. Runge, given the clear benefits of increasing seat belt usage
rates, why does the fiscal year 2004 budget exclude specific funding
for ``Click It or Ticket'' Campaigns in the States when I am not aware
of any program that has been more effective at getting people to buckle
up?
Answer. ``Click It or Ticket'' has indeed proven effective in
increasing safety belt use. NHTSA intends to continue the ``Click It or
Ticket'' mobilizations in 2004, and beyond. Early in calendar year
2003, the Agency solicited input from the Governors Highway Safety
Association and the highway safety offices of the fifty States, the
District of Columbia, and Puerto Rico. Given the commitment to
continuing the mobilizations that was expressed, NHTSA does not believe
that it is necessary to earmark grant funds to the States for this
purpose. Also, the Agency's intent is to focus a significant portion of
research and development (Section 403) funds to support the two
mobilizations through program development, technical assistance, and
evaluation initiatives.
Question. Is there an initiative in the budget that will work as
well or better than the mobilizations?
Answer. Given the proven success of conducting high visibility
enforcement campaigns and the expressed commitment from State Highway
Safety Offices to continue the national mobilization strategy, NHTSA
plans ongoing support for the ``Click It or Ticket'' mobilizations.
However, the Agency also plans to work with States on the development
of a variation on the model that involves continuous high-visibility
enforcement operations (24 hours a day, 7 days per week).
Through additional incentive funds proposed in the Department's
SAFETEA reauthorization submission, NHTSA will continue support for
``Click It or Ticket'' mobilizations during fiscal year 2004. At the
same time, States that have experienced the full benefit of the ``Click
It or Ticket'' approach will be encouraged to move toward a continuous
high-visibility enforcement model. Several States with the highest use
rates, including California and Washington, have had success with this
approach.
In 2004, States will be conducting one safety belt mobilization in
May, an impaired driving crackdown in December, and the States will
conduct high visibility enforcement mobilizations throughout the summer
months.
IMPAIRED DRIVING
Question. The preliminary National Highway Traffic Safety
Administration (NHTSA) data estimates 17,970 deaths last year due to
crashes involving alcohol--that's about 500 more than in 2001 and
represents 42 percent of all traffic fatalities. This number is too
high and we must take action.
Dr. Runge, can you tell me what NHTSA is doing this year to focus
on the problem of impaired driving and further what specifically the
budget propose to reduce the number of impaired drivers and related
accidents in the future?
Answer. NHTSA's 2004 goal is to reduce alcohol-related fatalities
to no more than 0.53 alcohol-related fatalities per 100 million vehicle
miles traveled (VMT). To achieve the goal, NHTSA will work with States
to develop a plan for maximizing general deterrence through high
visibility law enforcement, while also maintaining attention to
effective specific deterrence programs for dealing with offenders.
NHTSA demonstration programs in both the safety belt and impaired
driving areas have proven that highly visible enforcement, coupled with
paid and earned media, is an extremely effective general deterrent
strategy. Nearly all States have agreed to pursue both sustained (year-
long) high-visibility impaired driving enforcement, as well as periodic
enforcement crackdowns during July and December 2003. Sustained
enforcement will continue in 2004, with States conducting high
visibility enforcement operations according to their own schedules
throughout the summer months and a coordinated national crackdown in
December.
Media directed at high-risk groups is critical to the success of
these enforcement efforts. States and the District of Columbia have
agreed to utilize the national ``You Drink & Drive. You Lose.'' theme,
which reminds motorists that if they drive while impaired, they will be
arrested. In 2003, Congress provided the agency with $12 million to
support paid advertising to supplement State efforts during these
periods and to evaluate the efforts.
The Agency believes that this unprecedented level of coordinated
national law enforcement and associated media coverage will be
effective in creating deterrence to drinking and driving and will
change behavior. The Agency is currently conducting an evaluation of
the effect of paid media and sustained enforcement on impaired driving.
To ensure longer-term progress, the Agency will also encourage
sustained, highly visible enforcement and continue to advance the areas
of prevention, intervention, and treatment. Long-term success will be
dependent on people making informed choices about drinking and driving
and getting treatment to resolve substance abuse problems.
Question. The NHTSA budget proposes a new initiative to award
discretionary grants to States to demonstrate the effectiveness of a
comprehensive approach to reducing impaired driving.
Dr. Runge, could you explain how this program is different from the
old program in terms of scope, distribution of dollars and more
importantly, how it is an improvement over the old program?
Answer. The SAFETEA proposal would make $50 million available each
year for discretionary grants to certain States with high rates of
alcohol-related fatalities and/or high total numbers of alcohol-related
fatalities. These discretionary grants would fund programmatic
activities specified by NHTSA and agreed to by the recipient States.
These activities would be of proven effectiveness, e.g., well-
publicized and high-intensity enforcement of impaired driving
violations. Thus, under the proposal, NHTSA would annually direct $50
million to States with the greatest need for improvement in the
impaired driving arena, and would ensure that those States spend the
money in ways most likely to succeed in moving the impaired driving
numbers down.
Under TEA-21, the only State grant funds, which had to be spent on
impaired driving programs were the Section 410 alcohol incentive grant
funds, which totaled $40 million in fiscal year 2003. The States that
received these funds already had good legislative and programmatic
infrastructure for combating impaired driving, because these laws and
programs were needed to qualify for funding. Additional funds were
awarded to States that enacted .08 BAC laws. However, these funds could
be spent on any highway construction or highway safety program, not
just impaired driving.
Additionally, of the $337 million that SAFETEA would provide in
Section 402 basic formula and performance grants in fiscal year 2004,
all but $25 million resulting from safety belt use rate performance
would be available for impaired driving programs if States choose to
allocate for that purpose. SAFETEA thus gives States great latitude in
directing resources to address priority problems, including impaired
driving.
CHILD SAFETY SEATS
Question. For the past several years, the Committee has provided
funding for child safety seat campaigns. These campaigns have been very
successful at increasing the proper use of child safety seats while we
developed the second generation of child safety seats, which are now
accompanied by LATCH systems in all new passenger vehicles to allow for
easier installation and safer car seats.
One of the reasons this campaign has been so successful is due to
the broad base of support coming from State and local public safety
community, community activists, and private industry. Without this
coalition of support it is difficult to imagine that the campaign would
have had the effect of continued decreases in child fatalities.
Question. Dr. Runge, is this a model that can be used in other
areas that need improvement?
Answer. The success of the child passenger safety campaign has
clear and compelling implications for its utility as a model in other
program areas. NHTSA recognizes the transferable nature of this model
to other highway safety programs and has already taken numerous steps
to incorporate similar strategies in ongoing and future efforts.
In the early years of the campaign, the model focused solely on
child occupant restraints. NHTSA and partners, such as the Air Bag &
Seat Belt Safety Campaign (ABSBSC), were able to build on the momentum
created in child passenger safety in particular the hazard posed to
front seated children by airbags and transfer the effort to occupant
protection issues for all ages. Over the years, what began as
``Operation ABC (America Buckles Up Children)'' evolved into an
endeavor that included teen and adult restraint use as well. This model
was also used as the basis for what is known now as the ``Click It or
Ticket/Operation ABC'' campaign, which is also demonstrating
considerable gains in safety belt use.
The model is being refined even further in the area of Impaired
Driving. NHTSA and partners, such as Mothers Against Drunk Driving
(MADD), embarked on the NHTSA-led ``You Drink, You Drive. You Lose.''
campaign in fiscal year 2003. Here again, the State and local public
safety community, community activists, law enforcement, key advocacy
groups, and private industry are coming together to address a public
health concern and implement strategies to overcome this problem.
OCCUPANT PROTECTION
Question. The Committee has supported NHTSA's efforts to increase
seat belt usage among target populations whose usage rates are well
below the national average. We know that safety belt usage among teens
and young adults is lower than the national average.
Dr. Runge, what is NHTSA doing to identify and reach out to these
and other target populations?
Answer. NHTSA is conducting a variety of focused outreach and
demonstration programs to increase safety belt use among high-risk
groups. One important strategy for NHTSA is continuing the long-
standing partnerships with minority organizations to increase safety
belt use within these communities. Examples of these partnerships
include: The National Council of Negro Women; The National Latino
Children's Institute; The Hispanic American Police Command Officers
Association; The Bureau of Indian Affairs; and The National Asian
Pacific American Families Against Substance Abuse.
Successful outreach to the African American community was
exemplified in a recent meeting of African American leaders cosponsored
by Secretary Mineta and Dr. Dorothy Height, Chair of the National
Council of Negro Women, for the purpose of reviewing the success of the
Blue Ribbon Panel to Increase Seat Belt Use Among African Americans and
laying out plans for next steps. The 2002 National Occupant Protection
Usage Survey (NOPUS) showed an 8 percentage point increase in African
American safety belt use since the Panel's findings were released in
2000.
In the Hispanic community, families are being educated about the
importance of safety belt use through child passenger safety venues.
Culturally sensitive educational materials and curricula have been
developed, and an infrastructure of certified child passenger safety
technicians and fitting stations will soon be implemented in Hispanic
neighborhoods.
In 2001, NHTSA awarded teen safe driving demonstration grants in
Pennsylvania, Maryland, Minnesota, and Washington. This program focuses
on common high-risk behaviors for youth 15-20 years of age, including
lack of safety belt use, impaired driving, and speed. NHTSA also
tailored the May 2003 ``Click It or Ticket/Operation ABC'' mobilization
to teens, reaching out to high schools around the Nation to encourage
students to buckle up. NHTSA is also: conducting research into the
effectiveness of Graduated Driver's Licensing in reducing teen injuries
and fatalities in motor vehicle crashes; researching innovative and
model programs to increase teen safety belt use; and conducting focus
groups to develop effective messaging and strategies to reach teens.
Question. How are the programs being received in these communities?
Answer. Preliminary results from the four Teen Safe Driving
Demonstration Programs administered by NHTSA suggest that the
strategies implemented are well received and hold promise to increase
the awareness of young people about high risk driving behaviors and
increase safety belt use.
For example, in the Spokane, Washington, Teen Safe Driving
initiative, law enforcement officers visit high schools and conduct
``Room to Live'' presentations on risky driving behavior for teens--
speeding, lack of safety belt use, and impaired driving. Results from
the 500 students that evaluated this portion of the program include: 97
percent of students thought the program was effective; 98 percent of
the students thought other students would benefit from the program; 91
percent of the students felt that safety belts were more important to
them after the presentation; and there was a 29 percent increase in the
number of students who said they would wear their safety belt all the
time.
Preparing communities for interventions to increase safety belt use
through education and direct involvement in the planning and
implementation of programs is key to building consensus and positive
reception by the community. In the teen demonstration grants awarded by
NHTSA in 2001, letters were sent to families, schools were notified,
press events were held, and young people were (and are) directly
involved in the development and implementation of the program. This has
resulted in support for the program goals, strong partnerships, and
successful collaboration. In fact, the cities involved in the Minnesota
Teen Safe Driving Initiative jointly won the League of Minnesota Cities
Achievement Award in Public Safety for their initiative.
Successful strategies identified in these demonstration grants, as
well as findings from current research by NHTSA to identify effective
and promising strategies to reach teens, will be documented and
promoted as effective strategies for use by other States.
Question. If 75 percent of rollovers are unbelted, is it possible
to focus on occupants who are at greater risk of being in a rollover
accident as a target population?
Answer. NHTSA believes that it is possible to focus safety belt
program efforts on drivers of vehicles that are more likely than others
to be involved in rollover crashes. In fiscal year 2001 and 2002, the
Agency awarded two demonstration projects to test strategies for
increasing belt use in sport utility vehicles (SUV) and pickup trucks.
Early results from these demonstrations appear encouraging. Occupants
of these vehicles are over-represented in rollover crashes. Preliminary
results from the Virginia and Colorado demonstration sites highlight
the benefit of these projects. Virginia's ``Buckle Up Now''
demonstration project, which focused on the southern counties of the
State, saw safety belt usage increase from 61 to 77 percent following
introduction of the campaign.
The pickup truck demonstration projects in Florida and South Dakota
made significant strides in increasing safety belt usage among pickup
truck occupants. Florida reported a 16-percentage point increase--from
33 to 49 percent. Best practices guides based on findings from these
projects will be published in fiscal year 2004.
SHARE THE ROAD
Question. How do NHTSA and FMCSA coordinate with regard to the
``Share the Road'' education program, and how do you believe that
program can be made more effective?
Answer. As directed by TEA-21, NHTSA provided FMCSA with funding to
support the ``Share the Road'' program. This program is executed by
FMCSA. With the transfer of funds, FMCSA provides NHTSA with an
overview of program activities. FMCSA also coordinates program
activities through the Share the Road Coalition and intermittent
notification of issues as they arise during the fiscal year.
Recently, GAO completed a report on the effectiveness of the
``Share the Road'' program and how to improve the program delivery. GAO
provided recommendations on improving the effectiveness of the ``Share
the Road'' program. The DOT agrees with the GAO's recommendations.
______
Questions Submitted by Senator Patty Murray
Question. Dr. Runge, when the Federal Government has tried to get
the States to enact meaningful safety laws, it has taken two
approaches. In some instances, like the Minimum Drinking Age Act and
the 0.08 law, we have withheld highway construction funds from States
that don't pass the law. In other instances, we have provided incentive
payments to get the States to make safety improvements. The record is
clear, when we sanction highway construction funds, all the States
eventually comply. When we provide incentive payments, the record is
quite mixed. NHTSA's own data show that seat belt use increases as much
as 15 percent in States that have primary seat belt laws on the books.
Currently, 18 States and the District of Columbia have primary seat
belt laws in effect, including my own State of Washington. Yet, your
2004 budget request includes $100 million for a new primary belt
incentive grant program. This program is designed to encourage the
remaining 32 States to pass a primary seat belt law.
Why did NHTSA choose to create an incentive grant program rather
than a penalty program to get States to enact primary seat belt laws?
Given the lives that can be saved as a result of these laws, doesn't
this safety requirement call out for universal compliance?
Answer. NHTSA believes incentives have a greater opportunity to be
effective because the fiscal landscape has changed. Many States are
facing huge fiscal challenges. NHTSA dialog with State legislative and
executive offices during last year has indicated their desire to keep
incentive programs in the reauthorization. The Agency believes that the
proposed incentive for enacting a primary safety law--five times the
State's fiscal year 2003 allocation for Section 402--is significant
enough to create impetus for law changes in States that are searching
for financial help in almost every program.
Question. What specific examples can you provide us to demonstrate
that States are more likely to pass safety legislation when the Federal
Government provides incentive funding?
Answer. The Section 410 Alcohol-Impaired Driving Countermeasures
Grant program was amended by the Intermodal Surface Transportation
Equity Act (ISTEA) to provide financial incentives to States for the
development of improved laws and programs to deal with impaired
driving. Many States actively pursued enacting new or improved laws to
reduce drinking and driving, such as administrative license revocation
(ALR), .02 BAC laws for under age 21 drivers, and .08 BAC laws. During
the ISTEA authorization (1991-1997):
--Eight States enacted .08 BAC laws.
--Thirty-four States plus enacted .02 BAC laws for drivers under age
21 (25 enacted before the passage of the NHS sanction provision
in 11/95).
--Ten States enacted ALR laws.
ISTEA also established an innovative occupant protection law
incentive grant phase of Section 153, which authorized 3 years of
incentive grants, beginning fiscal year 1992, for States with both a
safety belt and a motorcycle helmet use law.
--Ten States took legislative action to enact a conforming safety
belt or motorcycle helmet law during the incentive phase
(fiscal year 1992-fiscal year 1994).
--Seven States adopted new safety belt laws: Nebraska, North Dakota,
West Virginia, Vermont, Massachusetts, South Dakota, and
Kentucky.
--Two States, Ohio and Connecticut, amended their existing safety
belt use laws to remove unacceptable air bag exemptions.
--For the seven States which enacted new safety belt laws and the one
State which enacted a motorcycle helmet law during the Section
153 incentive phase, increased belt and helmet use rates
following the enactment of these laws resulted in a combined
savings of about 140 lives, 2,400 moderate to serious injuries,
and nearly $220 million.
--Twenty-five of 27 eligible jurisdictions chose to participate in
the grant program. Thirty-six million dollars in grants
leveraged $52 million dollars in matching funds to increase
safety programs and compliance with occupant protection and
motorcycle helmet laws.
NHTSA believes significant incentives will work again because the
fiscal landscape has changed dramatically in the past 2 years. Many
States are facing huge fiscal challenges. The dialog between NHTSA and
State legislative and executive offices in the past year has been
increasingly about incentives remaining in the current authorization. A
fivefold Section 402 amount incentive for passing a primary safety law
is significant enough, NHTSA believes, to create law changes in States
that are searching for economies in every program.
MOTORCYCLE FATALITY INCREASES
Question. Dr. Runge, motorcycle deaths have gone up every year
since 1997 and the deaths of older cyclists have been rising for an
even longer period of time. The early estimates for 2002 indicate that
the overall number of motorcycle fatalities increased by 3 percent over
2001. And while the number of fatalities for younger riders decreased,
for riders over the age of 50, there was an astounding 24 percent jump
in the number of motorcyclists killed.
To what do you attribute the increase in the number of motorcycle
fatalities and why has there been a spike in the number of older rider
fatalities?
Answer. Three major changes have occurred to impact the motorcycle
crash problem: the number of registered motorcycles has increased, the
average age of riders has increased, and motorcycle helmet usage has
decreased.
Motorcycle sales have increased for 10 consecutive years, resulting
in more motorcycles on the highways, thereby increasing exposure. Many
of these motorcycles have larger engine displacement.
The average age of a motorcycle operator in 1998 was 38.1 years
compared to 33.1 years in 1990, 28.5 years in 1985, and 26.9 years in
1980. Motorcycle ownership by age illustrates that more individuals
over the age of 50 are purchasing motorcycles. Ownership for those age
50 years and over in 1998 was 19.1 percent compared to 10.1 percent in
1990, 8.1 percent in 1985, and 5.7 percent in 1980 (Motorcycle Industry
Council data).
According to the National Occupant Protection Use Survey,
motorcycle helmet use has decreased from 71 percent in 2000 to 58
percent in 2002. Reduced helmet use, impaired riding, especially riders
with high blood alcohol concentrations, and speeding are risk factors
that have affected the number of motorcyclists killed in traffic
crashes.
Question. In last year's bill, we provided additional funding for
training and crash avoidance skills. How have you put these funds to
use?
Answer. In fiscal year 2003, the Committee increased the motorcycle
program budget by $300,000 with the instruction that these additional
funds be used to improve crash avoidance skills and motorcyclist
conspicuity.
To improve crash avoidance skills, NHTSA is entering into a
cooperative agreement with the Motorcycle Safety Foundation to ensure
that the appropriate crash avoidance skills are incorporated into
revised curricula and are updated as needed. Motorcyclist training will
reflect these changes as appropriate.
To improve motorcyclist conspicuity, NHTSA is planning research to
determine if daytime running lamps on passenger cars affect the
motorcycle visibility in the traffic mix. Additionally, NHTSA will
conduct research to determine if modulating headlamps on motorcycles
increases the visibility and recognition of a motorcycle in the traffic
mix.
NHTSA'S PAID ADVERTISING PROGRAM
Question. Dr. Runge, over the last few years, this subcommittee
provided funding for paid media to support the highly successful
``Click It or Ticket'' program. In fact, the national ads for this
program have been running this month during the seat belt mobilization
campaign. This year, we expanded the program to include national media
for the drunk driving mobilizations that will occur in July and
December.
Dr. Runge and Mr. Hurley, what kind of feedback have you been
getting about the ``Click It or Ticket'' ads?
Answer. It is clear the ad campaign was successful. Anecdotal
feedback relating to the frequency of the ads and recall of the
campaign message by the public was extremely positive. Further,
preliminary research indicates that the campaign moved all key
indicators among the core audience of adult drivers and, more
importantly, those most at risk, males age 18-34.
Among all drivers surveyed, recall of the special effort by police
to ticket drivers for safety belt violations increased from 47 percent
in the pre-media survey to 75 percent on May 29, when post-campaign
surveys were conducted. Among males age 18-34, recall of the
enforcement campaign increased from 49 percent prior to the campaign to
78 percent after the campaign. This level of recall is significantly
higher than after the 2002 campaign. A majority (50 percent) of drivers
said police in their community were doing more to enforce their State's
safety belt laws over the past 4 to 6 weeks. This is up from 32 percent
prior to the campaign. Forty-six percent of men age 18-34 said police
in their community were doing more to enforce their State's safety belt
laws over the past 4 to 6 weeks. This is up from 33 percent among this
audience prior to the enforcement effort.
Among all drivers, the percentage of those saying they would be
likely to receive a ticket if they did not wear their safety belt
increased from 56 percent prior to the campaign to 62 percent after the
campaign. This is the highest percentage of drivers who perceived
themselves as likely to receive a ticket we have reached in the history
of this campaign.
Twenty-nine percent of drivers correctly identified, without being
prompted, ``Click it or Ticket'' as the name of the special effort by
police to ticket drivers for safety belt violations. Forty-two percent
of men age 18-34 correctly identified, without being prompted, ``Click
it or Ticket'' as the name of the special enforcement effort.
Question. Dr. Runge, given the demonstrated effectiveness of this
program, why didn't your 2004 budget proposal include funding for paid
media to continue these campaigns?
Answer. NHTSA intends to continue the ``Click It or Ticket'' and
``You Drink & Drive. You Lose.'' mobilizations in 2004, and beyond.
Early in calendar year 2003, the Agency solicited input from the
Governors Highway Safety Association and the highway safety offices of
the 50 States, the District of Columbia and Puerto Rico to gauge their
support continuing the paid media initiative. Given the solid
commitment to continuing the mobilizations that was expressed, NHTSA
does not believe that it is necessary to earmark grant funds to the
States for this purpose. States can use their existing grant funds to
support these efforts.
Question. This will be the first year that national media will be
used for the drunk driving mobilization efforts in July and December.
Dr. Runge, can you assure us that NHTSA is putting the same level
of effort into the media campaign for the drunk driving mobilizations
as you did with the seat belt mobilizations? Can we expect the
Department to have a national kick-off for the drunk driving media
campaign similar to what was held at the National Press Club a few
weeks ago for the seat belt mobilizations?
Answer. In fiscal year 2003 Congress provided an additional $11
million appropriation to NHTSA to support paid advertising for the
``You Drink & Drive. You Lose.'' crackdown. With this additional
funding, the Agency produced an advertisement, focusing on high
visibility enforcement, which will be aired nationally June 20 through
July 13. In addition, the Agency has purchased advertising time in 13
States that have either high alcohol-related fatality numbers or rates
to saturate their media markets during the same time. The Department
conducted a national press event on June 19 to raise awareness of the
motoring public that the ``You Drink & Drive. You Lose.'' national
crackdown will take place over three weekends surrounding the July 4th
holiday. At that event, NHTSA unveiled the national advertisement
reinforcing the message that law enforcement will be out in force
looking for impaired drivers. In addition to Departmental
representatives, potential speakers for the event include members of
the law enforcement community, Mothers Against Drunk Driving, and an
offender in the high-risk age group (e.g., ages 21-34) who has served
jail time for impaired driving. To drive this message home, the
location for the press event will likely be a booking facility at a
local police department.
INCREASE OF ALCOHOL-RELATED FATALITIES
Question. Alcohol-related fatalities increased for the third year
in a row to nearly 18,000 deaths in 2002--and this is just the early
estimate. Last year, Senator Shelby and I fought to increase the
funding for the NHTSA's impaired driving program in NHTSA's Operations
and Research account. We were successful in providing a 36 percent
increase over the President's 2003 request. I was disappointed that
your 2004 budget request cut the funding for NHTSA's impaired driving
program by 25 percent.
Dr. Runge, I'll ask the same question that I asked you last year,
why did you decide to cut the funding for your impaired driving program
at a time when alcohol-related fatalities are increasing?
Answer. The funding request for fiscal year 2004 has not decreased
and remains essentially level compared with the Agency's fiscal year
2003 request. NHTSA's fiscal year 2004 impaired driving program will
continue to focus on highly sustained and periodic law enforcement
campaigns, together with implementing improvements to the prosecution,
adjudication, and records systems. For fiscal year 2004, the Agency has
proposed a State grant program that will focus resources on a number of
high risk States with high alcohol-related crashes. Targeted use of
resources to sustain high visibility enforcement and encouragement of
States to adopt proven remedies should revive the downward trend in
alcohol-related fatalities that the Nation experienced over the last
decade.
Question. NHTSA also administers grant programs to the States for
various alcohol-impaired driving countermeasures through the Section
402 State and Community Formula Grant program. A few weeks ago,
Secretary Mineta testified before this subcommittee and stated that the
2004 request includes $148 million for impaired driving programs and
that the funds will be used to increase the number of highly visible
sobriety checkpoints and other State highway patrol programs. In
reviewing your 2004 budget, it appears that only $50 million is
specifically targeted for State grants on impaired driving initiatives.
Would you outline for us how much funding is specifically directed
toward impaired driving programs? For example, how much money will be
spent on high visibility enforcement efforts?
Answer. The SAFETEA proposal would direct $50 million each year to
initiatives to curb impaired driving through discretionary grants to a
limited number of States with high rates of alcohol-related fatalities
or high total numbers of alcohol-related fatalities. The discretionary
grants would fund programmatic activities specified by NHTSA and agreed
to by the recipient States. These activities would be of proven
effectiveness, e.g., well-publicized and high-intensity enforcement of
impaired driving violations. Additionally, of the $337 million that
SAFETEA would provide in Section 402 basic formula and performance
grants in fiscal year 2004, all but the $25 million resulting from
safety belt use rate performance would be available for impaired
driving. SAFETEA thus gives all States greater latitude in directing
resources to address priority problems, including high visibility
impaired driving enforcement efforts.
NHTSA'S OVERSIGHT OF STATE SAFETY PROGRAMS
Question. Dr. Runge, the second word in the administration's
SAFETEA proposal stands for ``accountable.'' Yet, the recent report
released by the General Accounting Office draws the conclusion that
NHTSA has been inconsistent in holding the States accountable for their
highway safety programs. The GAO reported that NHTSA's use of
management reviews varied from region to region and that the regional
offices have made limited and inconsistent use of improvement plans.
While some States may do a good job at meeting their safety objectives,
it is clear that others may benefit from greater input and guidance
from NHTSA.
How specifically does your SAFETEA proposal improve the
accountability of State highway safety programs? Does any part of your
SAFETEA proposal withhold Federal funding from States that fail to meet
stated safety goals?
Answer. The SAFETEA proposal would improve the accountability of
State highway safety programs because it would allocate the majority of
funds to States based on specific measures of their performance in
achieving safety improvements and improved outcomes. In fiscal year
2004, $100 million would go to States that succeeded in enacting
primary safety belt laws, or that achieved belt use rates of 90 percent
or higher. Another $50 million would be distributed only to States that
succeeded in achieving low or improved rates of total motor vehicle
fatalities, alcohol-related fatalities, and/or motorcyclist,
pedestrian, and bicyclist fatalities. Another $25 million would go only
to States that achieved high or improved safety belt use rates. Fifty
million dollars would be distributed to a limited number of States that
agree to conduct assessments of their programs and carry out impaired
driving programs that include specified performance elements. Beginning
in fiscal year 2005, States that fail to enact primary safety belt laws
or achieve 90 percent safety belt use without such a law would transfer
10 percent of their highway safety improvement program funds to their
Section 402 highway safety program.
CRASH CAUSATION
Question. NHTSA's 2004 budget includes the first $10 million
installment of your $60 million proposal to update the 30-year-old Tri-
Level Study on motor vehicle crash causation. The motor vehicle crash
causation study is expected to commence at the completion of the truck
crash causation study that has been funded through the Federal Motor
Carrier Safety Administration but conducted by NHTSA over the last 3
years. The 2003 Conference Report directed NHTSA to have the CDC's
National Center for Injury Prevention and Control evaluate the adequacy
of the crash causation research design.
Dr. Runge, given that the motor vehicle crash causation study is
expected to use the same methodology as the truck crash causation
study, would it make sense to see the results of the CDC evaluation
before moving ahead with the motor vehicle crash causation study?
Answer. The Large Truck Crash Causation Study (LTCCS) design and
implementation was thoroughly reviewed by a knowledgeable
Transportation Research Board (TRB) committee. Most of the TRB
recommendations were incorporated into the LTCCS study. Those that are
applicable to the upcoming National Motor Vehicle Crash Causation
Survey (NMVCCS) will be included in its design. In response to the
specific direction in the 2003 Conference Report, the National Highway
Traffic Safety Administration (NHTSA) has prepared a written
description of the Large Truck Crash Causation Study sample design. It
details the sampling process, as well as providing a description of the
practical application of this design into field operations. This report
is being provided to CDC for review. The results of the CDC evaluation
will be taken into consideration.
NHTSA'S ``CHECKPOINT STRIKEFORCE'' CAMPAIGN
Question. Dr. Runge, last June, your agency launched a sobriety
checkpoint blitz called ``Checkpoint Strikeforce'' which was the first
border-through-border law enforcement effort to deter drunk driving in
the mid-Atlantic region. The program, which utilized sobriety
checkpoints, law enforcement saturation patrols and public awareness
campaigns, began just before the Fourth of July and ended in January
this year.
What can you tell us about the results of ``Checkpoint
Strikeforce'' to date?
Answer. The first phase of NHTSA Region III's ``Checkpoint
Strikeforce'' program ran from July 4, 2002, through January 4, 2003.
The five States (Delaware, Maryland, Pennsylvania, Virginia, West
Virginia) and the District of Columbia collectively conducted 720
sobriety checkpoints at which they contacted over 406,000 motorists and
made 1,775 arrests for driving while under the influence (DWI) of
alcohol. Overall, more than 3,000 enforcement actions (e.g., citations,
arrests) were taken, including 77 arrests for felony charges.
Analysis of public attitude and awareness survey data is
continuing. In Virginia, for example, it is estimated that the
``Checkpoint Strikeforce'' message reached more than 2 million viewers
through television news stories, and 4 million print impressions were
made through newspapers and other print media. Surveys showed that 71
percent of Virginians ``strongly support'' checkpoints and 82 percent
believe checkpoints are a ``useful tool in keeping drunk drivers off
the road.''
The ultimate objective of ``Checkpoint Strikeforce'' is to deter
impaired driving and reduce crashes, injuries, and fatalities. Analysis
of crash and fatality data is incomplete. However, preliminary results
suggest that alcohol-related fatalities are down in four of the six
States, compared to the comparable period the year before.
Question. Are you planning a similar effort in any other region?
Answer. A similar effort is underway across the Nation, with every
State, the District of Columbia, and Puerto Rico participating to some
degree. The Campaign is called ``You Drink & Drive. You Lose.''
although some States use different terminology to describe the program
of sustained impaired driving enforcement, punctuated by periodic high-
intensity crackdowns with heavy publicity. For example, Illinois and
Washington call their Campaigns ``Drive Hammered, Get Nailed.'' The
sustained enforcement component of the Campaign is patterned on
``Checkpoint Strikeforce'', but with a higher degree of intensity. In
addition, ``You Drink & Drive. You Lose.'' also relies on the State
highway safety offices to coordinate the schedule of the agencies'
special operations so that there is a public perception that the
stepped up enforcement occurs continually. Although all States have
numerous law enforcement agencies participating, NHTSA's attention in
2003 is focused on 13 Strategic Evaluation States (Alaska, Arizona,
California, Florida, Georgia, Louisiana, Mississippi, Montana, New
Mexico, Ohio, Pennsylvania, Texas, and West Virginia) that have high
rates and/or numbers of alcohol-related fatalities. A nationwide
advertising campaign is being enhanced in those 13 States with
statewide television and radio advertisements, and their enforcement,
public awareness and crash data are being monitored to assess the
program's effectiveness.
COORDINATED GOVERNMENTAL EFFORT TO FIGHT DRUNK DRIVING
Question. Dr. Runge, roughly one-third of all drivers arrested or
convicted for DUIs or DWIs were repeat offenders. These individuals are
over-represented in fatal crashes and less likely to be influenced by
education or legal sanctions. Given that these hard-core drinkers are
probably the toughest individuals to reach, it seems that there ought
to be a coordinated governmental effort to reach them. Last year, we
directed NHTSA to work with the Attorney General's office to identify
the best strategies to reduce plea bargaining and to make sure that
impaired driving convictions are applied in a consistent manner. Beyond
that, I think it is important that we look at the public health aspects
of this problem to make sure that people are getting the treatment that
they need. I know that you spoke to the National Institute on Alcohol
Abuse and Alcoholism in February about how your two agencies might work
together on this very challenging problem.
What can you tell us about NHTSA's collaboration with the
Department of Justice and the Department of Health and Human Services
on drunk driving initiatives?
Answer. NHTSA collaborates regularly with both the Department of
Justice and the Department of Health and Human Services on initiatives
that can reduce impaired driving.
At the Department of Justice, NHTSA works closely with the Office
of Juvenile Justice and Delinquency Prevention (OJJDP) and the Bureau
of Justice Assistance (BJA) to support and expand the use of youth
courts and impaired driving courts throughout the country. In addition,
representatives of the Department of Justice participated in NHTSA's
2002 Criminal Justice Summit and agreed to support its recommendations.
At the Department of Health and Human Services, NHTSA works closely
with a number of agencies, including the Substance Abuse and Mental
Health Services Administration (SAMHSA), National Institute on Alcohol
Abuse and Alcoholism (NIAAA), the Centers for Disease Control and
Prevention (CDC), and the Office of the Surgeon General, regarding a
range of programs that focus primarily on prevention, intervention, and
treatment. In addition, this spring, NHTSA, SAMHSA, and NIAAA co-
sponsored a meeting of experts in alcohol research and the criminal
justice system, to consider viable treatment options.
top priorities for nhtsa and fmcsa's safety regulatory agenda
Question. Ms. Sandberg and Dr. Runge, Americans all across the
country rely on your two agencies to establish strong safety
regulations to ensure that our trucks and cars are safe and that their
drivers operate their vehicles in a safe and sober manner.
What are your top three priorities for safety rules in the coming
year that you think will achieve the most for highway safety?
Answer. NHTSA's top three priorities for safety rules for fiscal
year 2004 are:
Upgrade Side Impact Requirements for Light Vehicles.--NHTSA is
engaged in extensive research and rulemaking activities for an upgrade
of FMVSS No. 214, Side Impact Protection. Side crashes killed 9,048
light vehicle occupants and injured 773,000 in 2001. This upgrade will
address new safety issues arising out of the significant changes in the
U.S. side crash environment in recent years due to the increase in
light trucks, vans, and multipurpose passenger vehicles and is a first
step in addressing compatibility, one of the Administrator's
priorities. Most importantly, the upgrade adds a vehicle-to-pole impact
test simulating real world side crashes to rigid narrow objects.
Improved Rear Impact Occupant Protection.--NHTSA estimates that
each year 272,088 occupants of vehicles struck in the rear by another
vehicle receive whiplash injuries. Although whiplash injuries may be of
a relatively minor in severity, they entail large societal costs,
estimated at $1.76 billion for rear impact whiplash. To reduce the
frequency and severity of injuries in rear-end and other collisions,
the Agency is developing rulemaking actions to upgrade its head
restraint and seating system standards. It is important to protect
occupants in the rear seats from those in the front seats without
increasing the injury risk to those in the front. NHTSA believes that
with adequate head restraints and energy management, both goals can be
met. In the near term, a final rule on FMVSS No. 202, Head Restraints
and Notice of Proposed Rulemaking on FMVSS No. 207, Seating Systems
will be published.
Rollover Protection.--Approximately 275,000 light vehicles are
involved in rollover crashes each year. Rollover crashes are especially
lethal; although they comprise only 4 percent of crashes, they account
for almost one-third of light vehicle occupant fatalities and more than
60 percent of SUV fatalities. Rollover crashes cause approximately
10,000 fatalities and 27,000 serious injuries each year. Based on
testing and analysis, NHTSA is preparing a final notice to announce
dynamic rollover ratings to include in the NCAP rollover consumer
information program. In addition, the Agency plans to publish a notice
in fiscal year 2004 to upgrade FMVSS No. 216, Roof Crush Resistance.
nhtsa efforts to improve suv safety/reducing rollovers and aggressivity
Question. Dr. Runge, in February, you testified before the Commerce
Committee on your agency's efforts to improve the safety of Sport
Utility Vehicles. Your testimony pointed out that the rate of rollover
fatalities for SUVs is almost three times the rate of passenger cars
and rollover crashes represent 32 percent of passenger vehicle occupant
fatalities.
The TREAD Act required NHTSA to develop a dynamic rollover test by
November, 2002 but this deadline has not been met. When precisely will
this final rule be completed?
Answer. The Notice of Proposed Rulemaking for NCAP Rollover
Resistance Ratings using both Static Stability Factor and dynamic
maneuver tests in accordance with the TREAD Act was published October
7, 2002. We expect to publish this Final Rule in the late summer of
2003.
Question. There is also the issue of the aggressivity of SUVs--when
an SUV crashes with a passenger car, there are 16 driver fatalities in
a passenger car for every one driver fatality in the SUV. You assigned
an Integrated Project Team to evaluate aggressivity and incompatibility
in multi-vehicle crashes.
What is your timetable for developing rules to improve the safety
features of the passenger car and to reduce the aggressiveness of
larger vehicles such as SUVs?
Answer. NHTSA's plans to improve passenger car safety and reduce
the aggressiveness of larger vehicles are described in the
Compatibility Integrated Project Team report that has been placed in
Docket NHTSA-2003-14623. The initiative to improve passenger car safety
is focused on side impact protection. A proposal to upgrade Federal
motor vehicle safety standard No. 214, ``Side impact protection,'' is
now being developed, with an expected publication in late calendar year
2003.
Rulemaking to reduce the aggressiveness (i.e., improve vehicle
compatibility) of larger vehicles will not be initiated until some
near-term research is completed. Although analyses and studies
conducted to date have retrospectively demonstrated several vehicle
characteristics that appear to have considerable promise for
establishing compatibility requirements, the Agency has yet to
demonstrate that any of these characteristics can prospectively be
measured in a vehicle crash test and the level of compatibility be
quantified. A comprehensive crash test program is being pursued in an
effort to determine whether vehicles of comparable mass, but with
considerably differing aggressiveness characteristics, produce
quantifiable differences for occupants of the struck vehicle. If
differences can be quantified, NHTSA will seek to identify
countermeasures for potential establishment of compatibility
requirements. The Agency expects to complete this testing and analysis
in about a year, and then make a determination on whether to initiate a
rulemaking effort.
Question. Have you considered using the New Car Assessment Program
to determine how well passenger cars fare when struck by a larger
vehicle?
Answer. Yes. NHTSA is pursuing this as part of the vehicle
compatibility effort, which includes assessment of a number of proposed
crash test barriers. When NHTSA is able to develop metrics and
requirements that reflect the compatibility of a particular vehicle,
the Agency will then investigate whether or not testing with these
alternative crash barriers would provide useful consumer information,
and if so, how to best convey that information to the public so that
they can utilize it in their purchasing decisions.
STEPS NHTSA IS TAKING TO IMPROVE VEHICLE BLIND SPOTS
Question. Dr. Runge, the April issue of Consumer Reports includes a
dramatic chart showing the blind spots in four different vehicle
categories, from passenger sedans to minivans, SUVs and pickup trucks.
The blind spots are far larger than many motorists believe, putting
especially smaller kids in the greatest danger. Indeed, a 51" woman
driving a Chevrolet Avalanche has a 50 foot blind spot in back of her.
Even a 59" man has a 30 foot blind spot in the Avalanche. It is
estimated that as many as 58 children were killed last year because
they were rolled over by a vehicle that was backing up and unaware that
they were there.
What kind of data does NHTSA have on these types of non-crash, non-
traffic incidents that many times have grave safety implications? If
your agency doesn't collect this data, why not?
Answer. About 2 years ago, NHTSA began efforts to gather data
relating to non-traffic, non-crash vehicle safety hazards--a process
that, for a variety of reasons, can be difficult. Following the
successful completion of a pilot study of 1997 death certificates, a
more broad based program was instituted to review 1998 death
certificates, as well as other data and information sources such as
academic research, various health-related databases, and news sources.
By the end of this summer, NHTSA expects to publish a comprehensive
interim report on its non-traffic, non-crash research efforts,
including those focusing on deaths and injuries resulting from vehicles
backing up. NHTSA has reviewed about 60 percent of the 1998 death
certificates it has received. The Agency has identified 49 vehicle-
backing deaths in those death certificates. Of the 49 deaths
identified, 23 of the victims were 4 years old or younger, and 22 were
60 years old or older, with 19 of these older than 70. However, it
should be noted that the death certificate data does not indicate
whether there was a ``blind spot'' on the striking vehicle.
Question. What, if any, kind of testing has NHTSA done on backup
warning devices already on the market to determine which work best in
detecting a small child, for example, in the vehicle's blind spot?
Answer. In 1994, NHTSA published a report evaluating electronic
rear object detection systems for large trucks. The results of the
testing indicated that the devices have difficulty consistently
detecting many critical objects. They had a limited area of coverage,
which helps to reduce irrelevant warnings, but as a result, their
ability to detect moving pedestrians may be limited. Although NHTSA has
not performed any recent testing, the technologies currently in use for
passenger vehicles would be expected to have some of the same
limitations as those studied previously. Although NHTSA is aware that a
number of manufacturers offer some type of electronic backing aid, they
characterize these technologies as parking aids and not as collision
warning or pedestrian warning devices, in part, due to the current
limitations of the technology. Such limitations include the likelihood
that these devices could produce many false alarms to non-threatening
objects. False alarms are likely to reduce the effectiveness of the
warning by making drivers less responsive when there is a real
collision threat.
BLUE RIBBON COMMISSION ON HIGHWAY SAFETY
Question. The administration's SAFETEA proposal includes a total of
$7 million over 6 years for a National Blue Ribbon Commission on
Highway Safety. The purpose of this safety commission is to study the
Nation's highway safety needs and to make recommendations on how to
reduce highway fatalities. The final report of the Commission would be
delivered as late as February 1, 2009.
I'd like the entire panel to answer this question. Given what we
know about the benefits of seat belts, tough drunk driving laws, and
strong vehicle safety standards, why do we need 6 years and $7 million
to study a problem to which we already know the solutions?
Answer. The focus of the Commission would be more than studying
individual solutions to highway safety problems. The intent of this
initiative is to have a shared effort by the administration, Congress,
and the public to raise the level of concern regarding highway safety
to the forefront of the public health issues. The level of discussion
and awareness such as a Commission would engender, has yet to be
generated, even in response to the fact that almost 43,000 Americans
are killed each year on our highways. The Agency believes that it is
appropriate that innovative policies and organizational perspectives be
taken, resulting in a higher level of awareness and commitment to
provide appropriate resources to implement the needed strategies.
Question. Isn't this Commission just an excuse to put off
meaningful action on the safety remedies that we already know work?
Answer. Reducing the number of highway-related fatalities is a
continuing challenge. The Agency does not intend to put off meaningful
action on proven safety remedies. The proposed doubling of funds for
highway safety in SAFETEA indicates a significant investment to
implement the proven safety remedies. However, the Agency believes that
it should move forward to develop new strategies to address issues of
hardcore drunk-drivers and non-users of safety belts and motorcycle
helmets. The Commission would provide a unique opportunity to involve
all interested parties, including Federal, State, and local agencies,
and other public and private sectors, to discuss the possible solutions
and strategies to such issues.
______
Questions Submitted to the Federal Motor Carrier Safety Administration
Questions Submitted by Senator Richard C. Shelby
Question. The Motor Carrier budget proposes $9 million to implement
a Northern Border Truck Safety Grant program for HAZMAT inspections.
However, the budget states that an emphasis will be placed on
conducting additional roadside inspections at or near the more remote
border crossing locations. Could you explain how exactly the Northern
Border Truck Safety Grant program will be implemented and what kinds of
inspections will be conducted? Additionally, what is the long-term goal
of this new program?
Answer. FMCSA intends to develop a formula-based allocation with a
small discretionary set-aside modeled after the Motor Carrier Safety
Assistance Program (MCSAP). FMCSA has many years of experience working
with the southwest Border States in targeting the border enforcement
funds to maximize effectiveness and efficiency in meeting the mandates
of Congress and the administration. The variety of situations in the
Border States, the unique issues with their cross-border partners, the
characteristics of the ports of entry, types of cargo being transported
and inspection regimes, have provided us with the knowledge and
experience to effectively allocate the majority of the border
enforcement funds on a formula basis. The formula will be developed
through rulemaking.
If authorized, we would continue to distribute the funds according
to the priorities and criteria established and published in the Code of
Federal Regulations. The amounts available would be based on documented
needs, the unique circumstances, and information provided within the
individual State's funding request. The FMCSA and States have worked
cooperatively to meet Congressional mandates and optimize the level of
enforcement and compliance activities conducted with the limited funds
available for border enforcement programs. To date, all of the States
that have applied for funding have been allocated part of the available
funds.
We anticipate the States will request funds for additional
inspection activities, primarily on commercial motor vehicles
transporting hazardous materials, and to develop communications with
Federal inspections agencies in the Bureau of Customs and Border
Protection and the Transportation Security Administration (TSA). The
overall goal of this program is to ensure that State commercial motor
vehicle inspection agencies along the Canadian border have sufficient
resources to ensure that drivers and commercial motor vehicles,
especially those transporting hazardous materials, are safe and secure
from the threat of terrorist acts through increased inspections and
enhanced communications with Federal security agencies.
Question. The FMCSA budget proposes a total of $33 million for
implementation of the new entrant program. Given that there are
approximately 50,000 new entrants every year, how many audits does the
Department actually expect to conduct if this program is fully funded?
Answer. The FMCSA expects to conduct approximately 40,000 new
entrant audits per year.
Question. If we cannot expect to conduct an audit of every new
entrant, what consideration has been given to phasing in the program or
setting up some sort of criteria for prioritizing these new entrants
that will be audited?
Answer. The FMCSA has established a new entrant implementation plan
that meets the statutory language and ensures that an audit be
conducted on every new entrant within 18 months of beginning operation.
New entrant audits are scheduled based on the date of the carrier's
registration to ensure the 18-month deadline is met.
The FMCSA took aggressive action prior to publication of the
Interim Final Rule to ensure the program could begin full
implementation in fiscal year 2003. Prior to the implementation of the
rule, the agency issued a press release and established New Entrant
Program information on its website. FMCSA's National Training Center
established an aggressive training schedule to offer opportunities to
Federal and State personnel who will conduct the safety audits under
the program. In fiscal year 2003, our budget provided 100 percent High
Priority MCSAP funds in the amount of $2 million to 34 States to begin
implementing the program. The funds may be used to hire additional
staff and to train the staff designated to conduct the audits. Forty-
six States have signed onto the program. The agency also delivered the
FMCSA Field Operations Training Manual to each FMCSA Division
Administrator on April 10, 2003, with instructions to provide a copy to
their MCSAP counterpart and to meet and discuss the program with them.
FMCSA stands ready to conduct the audits now.
FMCSA believes that it has taken all appropriate actions to fully
implement the program. Our goal is to get the most exposure so that we
can positively impact safety and make any adjustments prior to full
funding in 2004. To phase in the program over time would serve only to
delay conducting audits on carriers, thus posing an increased risk to
the public. FMCSA believes that the safety benefits of the program are
great and that the more carriers it visits, the greater the potential
for the Agency to reduce the number of commercial motor vehicle
crashes, injuries, and fatalities.
Question. The FMCSA budget proposes $16.2 million for
implementation of the New Entrant program and an additional $17 million
in MCSAP funding for the same, for a total of $33 million. Since only
46 States have agreed to participate, what is the proposed Federal-
State funding split? Specifically, how will the additional MCSAP money
be distributed and how will the Federal share be used?
Answer. In January 2003, FMCSA anticipated that 30 percent of the
States would participate in the New Entrant program. While 46 States
indicate that they will participate, they are participating at
differing levels. The $17 million will be distributed to the States
based on their level of participation and financial need. Some States
have indicated that they will handle all new entrant audits given the
appropriate Federal funding, while some have indicated that they will
strive to participate to the extent they are able. Legislative
authority and personnel ceilings are two issues many States must
address prior to full commitment. The current amounts contained in the
President's budget reflect anticipated participation of State efforts
to conduct new entrant safety audits.
The Federal share will be used to hire 32 Federal positions for the
management, oversight, and quality control of the New Entrant audit
program, as well as to hire private contractors to conduct the new
entrant audits.
Question. FMCSA is responsible for implementation of HAZMAT rules
and regulations following implementation of the Patriot Act. To date,
what steps have been taken to comply with these requirements?
Answer. On May 5, 2003, TSA published an Interim Final Rule in the
Federal Register that implemented the background check provisions of
the USA PATRIOT Act. TSA is developing the program to implement that
regulation. Also on May 5, FMCSA issued a companion regulation
prohibiting States from issuing, renewing, transferring, or upgrading a
commercial driver's license (CDL) with a hazardous materials
endorsement unless TSA has first conducted a background records check
of the applicant and determined that the applicant does not pose a
security risk warranting denial of the hazardous materials endorsement.
Question. Are Household Goods operators required to submit to any
specific certification process through FMCSA or other regulatory
agency?
Answer. All household goods applicants are required to certify that
they are fit, willing and able to provide the specialized service
necessary to transport household goods. This assessment of fitness
includes the applicant's general familiarity with the Federal Motor
Carrier Commercial Regulations for household goods transportation.
In addition, all applicants must certify that they will offer a
dispute settlement or arbitration program to resolve loss and damage
disputes on collect-on-delivery shipments. Applicants must ensure
willingness to acquire the protective equipment and trained operators
necessary to perform household goods movement. In its decision letter
granting the carrier authority to operate in interstate commerce, FMCSA
advises applicants that an arbitration program is required.
Question. How many Hazardous Materials incidents occur each year?
Answer. DOT collects hazardous materials incident data in two
different ways. FMCSA compiles data on trucks carrying hazardous
materials involved in crashes in the Motor Carrier Management
Information System (MCMIS) through reports of police officers
responding to the crash. RSPA requires carriers to report unintentional
releases of hazardous materials in transportation, which is defined as
an ``incident.'' RSPA uses these data to extract ``serious'' incidents,
which include releases resulting in the closure of a major
transportation artery, a fatality or injury, the evacuation of 25 or
more people, and other major impacts to the transportation system.
HAZARDOUS MATERIAL TRUCK CRASHES AND RELEASES, PAST 5 YEARS REPORTED TO
FMCSA
------------------------------------------------------------------------
Crash w/
Year Crashes Release
------------------------------------------------------------------------
1998.................................... 2,977 589
1999.................................... 3,527 500
2000.................................... 2,271 380
2001.................................... 1,891 297
2002.................................... 1,577 202
------------------------------------------------------------------------
Source: MCMIS.
HAZARDOUS MATERIALS HIGHWAY INCIDENTS, PAST 5 YEARS REPORTED TO RSPA
------------------------------------------------------------------------
Serious
Year Incidents Incidents \1\
------------------------------------------------------------------------
1998.................................... 13,110 356
1999.................................... 15,008 456
2000.................................... 15,129 463
2001.................................... 15,825 487
2002.................................... 13,514 \2\ 453
------------------------------------------------------------------------
Source: Hazardous Materials Information System, RSPA.
\1\ Serious Incident Defined by RSPA in 2002.
\2\ Estimate--Data are incomplete.
Question. How do NHTSA and FMCSA coordinate with regard to the
``Share the Road'' education program, and how do you believe that
program can be made more effective?
Answer. In fiscal year 2003, Congress earmarked $500,000 to be
transferred from the National Highway Traffic Safety Administration
(NHTSA) to the Federal Motor Carrier Safety Administration (FMCSA) for
the Share the Road program. Once FMCSA provides NHTSA with a spending
plan for the funds, the monies will be transferred. FMCSA partners with
NHTSA on a steering team on the Share the Road Coalition, and
communicates regularly to discuss issues as they arise throughout the
year.
To improve the effectiveness of Share the Road, the FMCSA has
broadened the program's scope to include all highway users and has
identified specific target audiences that offer the highest opportunity
for safety improvement. Education and outreach materials are being
developed and tested to evaluate effectiveness. Future plans to
increase the effectiveness of the Share the Road program include
distributing those projects considered most effective throughout the
country via FMCSA field staff and State and industry partners, and by
making them available to community safety advocates concerned with
truck safety issues. In response to recent GAO recommendations, the
Agency plans to develop a Share the Road program planning document and
conduct comprehensive program reviews to identify opportunities for
improvement.
Question. The new entrant program appears to be the primary new
initiative in the Motor Carrier budget. The budget proposes $33 million
for implementation of this program.
(a) Ms. Sandberg, it is my understanding that there are
approximately 50,000 new entrants every year. How many audits does the
Motor Carrier Administration expect to conduct at this level of
funding?
(b) If we cannot expect to conduct an audit of every new entrant,
what consideration have you given to phasing-in the program or to
establishing some sort of criteria for prioritizing those new entrants
that will be audited?
Answer. (a) The FMCSA expects to conduct approximately 40,000 new
entrant audits per year.
(b) The FMCSA has established a new entrant implementation plan
that meets the intent of the statutory language and will ensure that an
audit is conducted on every new entrant within 18 months of beginning
operation. New entrant audits are scheduled based on the date of the
carrier's registration to ensure the 18-month deadline is met.
The FMCSA took aggressive action prior to publication of the
Interim Final Rule to ensure the program could begin full
implementation in fiscal year 2003. Prior to the implementation of the
rule, the Agency issued a press release and established New Entrant
Program information on its website. FMCSA's National Training Center
established an aggressive training schedule to offer opportunities to
Federal and State personnel who will conduct the safety audits under
the program. In fiscal year 2003, FMCSA's budget provided 100 percent
High Priority MCSAP funds in the amount of $2 million to 34 States to
begin implementing the program. The funds may be used to hire
additional staff and to train the staff designated to conduct the
audits. Forty-six States have signed onto the program. The agency also
delivered the FMCSA Field Operations Training Manual to each FMCSA
Division Administrator on April 10, 2003, with instructions to provide
a copy to their MCSAP counterpart and to meet and discuss the program
with them. FMCSA stands ready to conduct the audits now.
FMCSA believes that it has taken all appropriate actions to
implement the program. Its goal is to get the most exposure for the
program to impact positively on safety and make any adjustments prior
to full funding in 2004. To phase the program in over time would only
serve to delay conducting audits on carriers, thus posing an increased
risk to the public. We believe that the safety benefits of the program
are great and that the more carriers we visit, the greater the
potential to reduce the number of commercial motor vehicle crashes,
injuries, and fatalities.
Question. Ms. Sandberg, what is the status of the Large Truck Crash
Causation Study, and when will you be sending a progress report to
Congress?
Answer. Collection of field data on injury and fatal crashes
involving large trucks for the Large Truck Crash Causation Study will
continue until the end of 2003. As of May 2003, investigations had
begun on 868 large truck crashes (with a goal of investigating 1000
total crashes). Coding and quality control on all cases should be
completed by the middle of 2004. The full study database should be
released to the public by the end of 2004. Both FMCSA and NHTSA will be
conducting multiple analyses.
FMCSA will forward a letter report to Congress on the progress of
the study and the adjustments made to the study as a result of
recommendations from the Transportation Research Board later this
summer. In addition, FMCSA plans to issue a report in the fall of this
year with preliminary information on the data collected for the study.
Question. An important part of the implementation of the New
Entrant program relies on the cooperation of the States to conduct
safety audits. However, at this time only 46 States have agreed to
participate in the program.
Ms. Sandberg, how will the program be implemented in the remaining
4 States and how does FMCSA propose to fund it?
Answer. FMCSA will be responsible for implementing the New Entrant
program where States cannot fully participate or choose not to
participate. Currently, FMCSA Safety Investigators are conducting
safety audits in these four States and others where there is a need. In
fiscal year 2004, FMCSA is requesting $16 million to support a Federal
program to hire contractors to conduct new entrant audits. The FMCSA
anticipates that private entities will be conducting the audits on the
new entrant carriers in these four States and other States where 100
percent State participation is not available. In addition to the
Federal program, there is also $17 million requested for grants to
States to conduct audits.
Question. Ms. Sandberg, Motor Carriers recently issued a new Hours
of Service rule. While this rule increases by 1 hour the number of
hours a driver may be on the road, it also increases by 2 hours the
number of required off-duty hours.
Could you explain how you believe this new rule is going to make
our highways safer?
Answer. The new science-based rule makes significant strides in
providing commercial drivers a 24-hour work/rest schedule in line with
the body's circadian rhythm. The longer off-duty time allows drivers to
have more regular schedules and increases the potential for quality
sleep. This approach is consistent with fatigue and sleep-related
studies considered in development of the rule that indicate the amount
and quality of sleep a person receives has a strong influence on
alertness. The final rule helps to eliminate some of the worst aspects
of daily rotating schedules and the compression of weekly on-duty time
into a short portion of the workweek. This reduces the workday from 15
to 14 hours, replaces 8 off-duty hours with 10 off-duty hours, and, in
particular, will not allow work breaks to extend the 14 hours on-duty
time.
Question. Ms. Sandberg, your statement mentions the HAZMAT
permitting program as required by Congress. It is not clear how much of
the HAZMAT permitting process has been turned over to the
Transportation Security Administration at the Department of Homeland
Security and how much authority remains with the Motor Carrier
Administration.
I have been told that virtually all of that process has been turned
over to TSA while you are expected to support the contract to conduct
the background investigations. Ms. Sandberg, can you clarify this for
me?
Answer. FMCSA has not turned over any aspect of the HAZMAT
permitting process to TSA. This requirement comes out of the Hazardous
Materials Transportation Uniform Safety Act of 1990 and is separate
from the background check requirements of the USA PATRIOT Act.
FMCSA has coordinated with TSA in developing the proposal for the
permit program, however, FMCSA will oversee the permit application
process and FMCSA field staff will conduct investigations of companies
applying for permits to determine fitness. In fact, TSA is transferring
funding for implementing a hazardous materials permit program to FMCSA.
Currently, FMCSA has submitted a Supplemental Notice of Proposed
Rulemaking (SNPRM) to establish a safety permit program and require
motor carriers transporting these materials to obtain a safety permit
prior to transporting these hazardous materials. The Office of
Management and Budget (OMB) is currently reviewing the SNPRM for
Hazardous Materials Safety Permits.
Question. The March 2001, General Accounting Office report to
Congress concluded that FMCSA oversight of the household goods moving
industry and enforcement of the consumer protection regulations has
been minimal since 1996. As a result of this vacuum, rogue movers have
proliferated and are literally holding consumers' possessions as ransom
for addition payment.
(a) Ms. Sandberg, what is your plan to address this problem?
(b) How is the budget increase for household goods enforcement
planning to be used specifically for enforcement and investigation?
Answer. (a) FMCSA has taken a proactive approach by developing a
comprehensive Household Goods (HHG) Outreach and Enforcement Program to
focus on addressing consumer complaints and enforcing regulations on
non-compliant carriers.
A HHG Program Manager has been hired to administer and implement
the agency's overall HHG Enforcement Program, as well as coordinate
regulatory strike force activities.
FMCSA has enhanced its enforcement program by developing
enforcement criteria to identify the most egregious HHG violators and
to conduct enforcement strike forces on targeted carriers. HHG
carriers/brokers identified for investigation under this process have
demonstrated a continuous pattern of noncompliance with our commercial
regulations.
(b) The budget request supports a study on the moving industry
dispute settlement programs for resolving loss and damage claims, and
provide funding to hire seven additional commercial investigators to
conduct HHG investigations on the most egregious violators of the
commercial regulations.
______
Questions Submitted by Senator Patty Murray
Question. Ms. Sandberg, your 2004 budget includes $9 million for
the agency's regulatory development program. This funding will be used
to establish a medical review board and a national medical examiner
registry in an effort to upgrade the quality of commercial driver
medical examinations nationally.
As you know, the FAA has its own program to ensure that pilots are
medically qualified. What input, if any, have you had from the FAA in
developing this program?
Answer. FMCSA is conducting a planning analysis to identify a
feasible set of strategies to be used to develop and maintain a
national registry of medical examiners and a program to certify all
medical examiners that perform commercial driver physical examinations.
It will review the procedures that the FAA and other Federal agencies
use to certify medical examiners and investigate different approaches
for establishing a national database of medical examiners.
Question. When precisely can we expect this registry to be fully
implemented?
Answer. Estimation of a precise implementation date for the
registry of medical examiners is complicated by uncertainties in
designing a new program that is not yet defined in a Notice of Proposed
Rulemaking (NPRM). Until the agency has completed its planning analysis
for the national registry and published a final rule, an estimation of
a full implementation date would be speculative.
Question. NHTSA's 2004 budget includes the first $10 million
installment of your $60 million proposal to update the 30-year-old Tri-
Level Study on motor vehicle crash causation. The motor vehicle crash
causation study is expected to commence at the completion of the truck
crash causation study that has been funded through the Federal Motor
Carrier Safety Administration but conducted by NHTSA over the last 3
years. The 2003 Conference Report directed NHTSA to have the CDC's
National Center for Injury Prevention and Control evaluate the adequacy
of the crash causation research design.
Ms. Sandberg, the Transportation Research Board has provided your
agency with a series of recommendations on the crash causation study.
Which, if any, of TRB's recommendations have you decided not to
implement?
Answer. FMCSA hired the Transportation Research Board to consult on
the design and implementation of the Large Truck Crash Causation Study.
The TRB panel, consisting of experts from varying fields, met five
times over the past 3 years. A panel subcommittee met an additional two
times to address several specific issues. The TRB panel made many
suggestions, but made only a few formal recommendations for the sample
design, the data collection forms and data coding protocol. Numerous
changes were incorporated into the LTCCS as a result of the TRB
suggestions. Of the formal recommendations, two were not implemented:
--``Exclude two-axle straight trucks from the study to focus
exclusively on larger straight trucks and combination
vehicles'' (November 15, 2000, letter to FMCSA). Since FMCSA
regulates these vehicles, we need crash causation data on
crashes involving these vehicles.
--``Study should collect more data on vehicle components, vehicle
dynamics, brake condition, measurement of skid marks, roadway
geometry, and objective estimates of pre-crash speed''
(December 4, 2001, letter to FMCSA). Collection of some
information on many of these elements is already part of the
study. However, collection of more in-depth data would require
complete reconstructions of each crash and vehicle, which was
not possible given the study resources, design, and timeline.
Question. Ms. Sandberg and Dr. Runge, Americans all across the
country rely on your two agencies to establish strong safety
regulations to ensure that our trucks and cars are safe and that their
drivers operate their vehicles in a safe and sober manner.
What are your top three priorities for safety rules in the coming
year that you think will achieve the most for highway safety?
Answer. For FMCSA, the top three safety rules that will achieve the
most for highway safety are:
--Implementing the new driver hours-of-service rule to help minimize
the number of crashes due to large truck driver fatigue.
--Implementing the new entrant interim final rule to ensure that new
motor carriers are in compliance with safety regulations at the
onset of their operations.
--Developing a notice of proposed rulemaking that would merge the
requirement for driver medical certification with that of
obtaining a commercial driver's license (CDL). The 1999
Louisiana bus crash might have been avoided had such a
requirement been in place.
Question. Ms. Sandberg, your testimony refers to a revised process
for the development of motor carrier safety regulations that is
designed to improve both the quality and timeliness of your agency's
rulemakings.
Why should we be convinced that these changes would result in
greater motor carrier safety? How much time will you be saving in the
rulemaking process--are we talking months or years?
Answer. FMCSA's new Rulemaking Order, which was signed in January
2003, established for the first time a clearly defined process by which
FMCSA can develop its safety regulations. While it is difficult to
predict specific time saved, I anticipate that it will have a positive
impact on both the quality and timeliness of our rulemakings, as well
as commercial motor vehicle (CMV) safety. In the legislation that
established the FMCSA, Congress placed special emphasis on the
importance of timely rulemaking as an important way to achieve
reductions in the number and severity of CMV crashes.
Question. This new process is designed to build consensus with
senior managers earlier in the rule's development. Does this new
process also include any sort of negotiated rulemaking process--similar
to what the FRA uses with its Rail Safety Advisory Committee? Under
what scenarios might you choose to use a negotiated rulemaking process
where both industry and safety groups engage in the rule's development?
Answer. The FMCSA has no standing advisory committee similar to
FRA's Rail Safety Advisory Committee, which was formally established
under the Federal Advisory Committee Act. However, FMCSA's new
rulemaking process provides for negotiated rulemaking. The Agency would
use, and has used, this approach when there are complex issues and
there is sharp disagreement among the regulated parties that cannot
otherwise be resolved through the standard notice and comment approach
to rulemaking. An example where the Agency has used this approach is
the recently published regulation on driver hours-of-service.
Question. Ms. Sandberg, just over a year ago, the Inspector General
released a report on your agency's oversight of the Commercial Driver's
License (CDL) program. The principal findings of the IG's report were
as follows: first, CDL fraud is a significant problem; second, that
FMCSA needs to strengthen its oversight of State CDL programs; and
third, the FMCSA should use sanctions when necessary to enforce
compliance with CDL requirements.
(a) What specific steps has your agency taken to reduce CDL fraud
and to strengthen your oversight of the State CDL programs?
(b) Given what you know about the effectiveness of sanctions from
your experience as Deputy Administrator of NHTSA, has your agency
withheld any highway funds from States that have failed to correct
significant CDL problems?
Answer. (a) Through a cooperative agreement with the American
Association of Motor Vehicle Administrators, FMCSA is using an $8
million fiscal year 2002 supplemental appropriation to develop a 14-
task effort to better detect and prevent fraudulent activities within
the State CDL programs. These tasks include activities such as
fraudulent document recognition training for State licensing agency
staff, uniform identification practices and documents, the development
of best practices for State and third party test examiners, and the
conducting of a CDL Fraud Symposium in November 2002, where States
shared information on efforts to detect and prevent fraud.
FMCSA has strengthened and enhanced the CDL compliance and
oversight program. A 3-year cycle of this enhanced CDL compliance
process has just been completed where written administrative procedures
and laws are reviewed and a complete ``hands on'' operational review is
conducted to make sure that written procedures are being followed.
Starting in 2002, a legal sufficiency review is being conducted on
State CDL laws, statutes, and administrative procedures.
(b) No. To date, FMCSA has not withheld any Federal-aid highway
funds from any State in order to get significant CDL compliance
problems and deficiencies corrected. While FMCSA has initiated the
process to withhold funds in several States, these States were able to
correct the deficiencies before the funds were withheld. The
withholding of funds has been used as a last resort. The Agency has
been successful in getting States to develop reasonable action plans
and schedules to correct deficiencies. Continued monitoring of these
action plans has been instrumental in correcting deficiencies within
the agreed time period.
Question. Ms. Sandberg, when Secretary Mineta appeared before this
subcommittee on May 8th, I asked him whether the Department intended to
appeal the Ninth Circuit's decision regarding the U.S.-Mexico
commercial vehicle border crossings. He stated that the administration
was weighing its options as to whether the decision should be appealed
to the Supreme Court or alternatively, whether the Department should
prepare the required environmental impact statement.
Which option has the administration decided to pursue?
Answer. FMCSA does not view seeking Supreme Court review of the
Ninth Circuit decision and preparing an environmental impact statement
(EIS) as mutually exclusive options. Although the administration has
not yet determined whether to file a petition for review with the
Supreme Court, FMCSA has solicited bids from contractors for EIS
preparation and expects to select a contractor within the next 30 days.
Therefore, the Agency is taking the necessary steps to prepare an EIS
regardless of whether the administration seeks further legal review of
the Ninth Circuit decision.
Question. Despite the delay in opening the border, this
subcommittee has funded every penny you have requested to build up the
inspection force and your oversight capacity at the border. As a
result, you currently have 43 percent of all of your Motor Carrier
Field Safety Enforcement personnel located at the U.S.-Mexican Border.
(a) Given the anticipated delay in the opening of the border
because of this court case, do you believe it still makes sense in
terms of improving truck safety nationwide to have 43 percent of all of
your truck safety enforcement personnel at the Mexico border?
(b) Would you like this Committee to consider a temporary statutory
waiver that would allow you to move these safety enforcement personnel
throughout the United States?
Answer. (a) Federal staffing at the Southern Border is necessary to
conduct inspections, safety audits, and compliance reviews on U.S. and
Mexican carriers. With 80,000 distinct vehicles making over 4.3 million
crossings a year, there is a need for a significant Federal presence at
border crossings. Although Border States have an enforcement presence
at crossings, the extended hours crossings are open, coupled with large
crossing volumes, require a Federal presence. In addition, FMCSA is
responsible for conducting safety audits and compliance reviews for a
large commercial zone population of carriers. Once the border is open,
the added burden of conducting reviews on long-haul carriers will be
placed on the Federal staff.
(b) The ability to efficiently and effectively deploy staff can be
accomplished under authorities FMCSA currently has available.
Therefore, a statutory waiver is not necessary.
Question. Ms. Sandberg, the Motor Carrier Safety Improvement Act
required that your agency conduct safety reviews for each new entrant
trucking firm within the first 18 months after the trucking company
begins operations. These new entrants, which total anywhere from 40,000
to 50,000 a year, pose a significant commercial motor vehicle safety
risk. Your testimony indicates that 46 States have agreed to either
partially or fully conduct new entrant safety audits. Your 2004 budget
requests $16.2 million along with $17 million in Motor Carrier Safety
Assistance Program for the joint Federal and State efforts.
(a) Which States have not agreed to conduct new entrant safety
audits and why haven't they agreed to do so?
(b) How, if at all, will these new entrant audits differ from the
safety audits that you conduct on trucking companies with existing
operating authority?
Answer. (a) Delaware, the District of Columbia, Oregon, and Wyoming
have indicated they will not participate in the new entrant program,
due primarily to their inability to staff the program at the State
level.
(b) A new entrant safety audit is a requirement for all new motor
carriers applying for a U.S. DOT number after January 1, 2003. The
purpose of the safety audit is to provide educational and technical
assistance to the new entrant and gather safety data needed to make an
assessment of the new entrant safety performance and the adequacy of
its safety management controls. The motor carrier contact is required
to be conducted within the first 18 months of operations. It is non-
enforcement oriented and will result in a pass/fail outcome based upon
the motor carrier's overall safety management controls. If the carrier
fails the safety audit, it must take corrective actions or it will not
be granted permanent operating authority.
A compliance review is an on-site investigation of the motor
carrier's compliance with the Federal motor carrier safety and
hazardous materials regulations and is usually conducted on motor
carriers that are determined to be higher risk. Higher risk can be
derived from data gathered regarding on-road performance, including
inspections and crashes, as well as prior compliance reviews,
complaints, and special projects. Unlike safety audits, motor carriers
are not required to undergo a compliance review as a condition of
authority but are always subject to a compliance review, even during
the initial 18 months of operation. Compliance reviews result in a
rating of satisfactory, conditional, or unsatisfactory, based upon the
violations discovered during the investigation and the data gathered
from on-road activity. If a carrier is rated unsatisfactory, it must
have the rating upgraded in order to avoid an operations out-of-service
declaration within 60 days of the compliance review for private and
for-hire carriers, and within 45 days for transporters of passengers
and placarded hazardous materials. The compliance review is a
compliance monitoring and enforcement event. The motor carrier and
drivers are subject to fines and other penalties for serious
noncompliance with Federal safety and hazardous material violations.
Question. The Inspector General's follow-up audit on the
implementation of the safety requirements at the U.S.-Mexico border
includes a recommendation to use safety auditors and investigators for
the new entrant program while the border opening is delayed due to the
Ninth Circuit Court decision.
Do you intend to use these auditors and investigators to conduct
new entrant safety audits?
Answer. FMCSA is assessing the recommendations contained in the
Inspector General's report on implementation of safety requirements at
the U.S.-Mexico border and will respond formally to those
recommendations in the very near future. One of the issues we must
consider in using border auditors and investigators for new entrant
audits is that we maintain an appropriate level of enforcement staff at
the border to ensure commercial zone safety.
______
Questions Submitted to Mothers Against Drunk Driving
Questions Submitted by Senator Richard C. Shelby
Question. Mr. Hurley and Ms. Hamilton, have you analyzed the
funding levels proposed in the current budget and in the SAFETEA
proposal?
Answer. The Department of Transportation's fiscal year 2004 budget
request and ``SAFETEA'' reauthorization proposal are woefully
inadequate in terms of addressing the rising levels of alcohol-related
traffic deaths in America.
NHTSA Fiscal Year 2004 Budget.--NHTSA's funding request appears to
have increased monies for behavioral funding, however, this is not the
case. The fiscal year 2004 request is significantly less than the
fiscal year 2003 request. The fiscal year 2004 request includes $222
million of TEA-21 resources for the Sections 157 and 163 grant programs
formerly appropriated in the Federal Highway Administration budget.
NHTSA has always administered these funds and is now requesting receipt
of this funding directly. This apparent increase is really no increase
at all.
The fiscal year 2004 request for behavioral funding is
$516,309,000, however when Section 157 and 163 monies are subtracted,
the amount is reduced to $294,309,000. The fiscal year 2004 request is
a quarter of a million less than the fiscal year 2003 request.
Additionally, only a percentage of this funding is guaranteed for
behavioral safety since States are able to use this funding for roadway
safety/highway construction projects.
The levels of funding specifically for impaired driving
countermeasures are reduced in the fiscal year 2004 request. The fiscal
year 2004 request provides a $50 million impaired driving grant program
to a limited number of ``problem'' States to demonstrate the
effectiveness of a comprehensive approach to reducing impaired driving
and for identifying causes of weakness in a State's impaired driving
control system. This funding level is $100 million less than funds
available to States in fiscal year 2003 for impaired driving
improvements.
Additionally, the NHTSA Impaired Driving Division budget request is
significantly lower than fiscal year 2002 enacted levels ($10.9 million
in fiscal year 2004 request compared with $13.5 million fiscal year
2002 enacted).
SAFETEA Proposal.--The administration's ``SAFETEA'' proposal
significantly decreases funding for alcohol-impaired programs (-67
percent). SAFETEA proposes an impaired driving program totaling only
$50 million, far less than current funding levels. In fiscal year 2003,
TEA-21 authorized $150 million for alcohol-impaired driving
countermeasures (impaired driving grants and .08 BAC incentives) and
contained requirements for States to enact repeat offender and open
container laws. If States failed to pass these alcohol-impaired driving
laws then a percentage of their Federal construction funds were
transferred. Not only does ``SAFETEA'' slash impaired driving funding
to $50 million, it fails to include incentives to States to enact
effective alcohol-impaired driving countermeasures.
While the administration, the Department of Transportation and
NHTSA claim reducing alcohol-related traffic fatalities is a top
priority, their fiscal year 2004 budget request and ``SAFETEA''
proposal fails to provide a coherent plan to address the carnage caused
by alcohol-impaired driving on America's roadways.
Question. Ms. Hamilton, do you have any thoughts about Dr. Runge's
discussion of NHTSA's plans and would you propose to approach the
problem differently?
Answer. MADD believes that Dr. Runge and NHTSA have a strong
understanding of what is needed to drive down the number of people
killed and injured in alcohol-related crashes. However, their fiscal
year 2004 budget proposal and administration's SAFETEA plan fails to
provide adequate funding, fails to apply effective data and science
driven countermeasures, and fails to provide leadership to seriously
address the increasing amount of death and injury due to alcohol-
related traffic crashes.
MADD believes that progress will occur when adequate funding is
provided for traffic safety programs and when a commitment is made to
put proven impaired driving countermeasures, such as law enforcement
mobilizations, into place. More accountability is needed at the
national, regional and State levels to ensure that Federal funds are
being used in a strategic and coordinated effort. Additionally, States
should be encouraged to enact priority traffic safety laws, such as
primary seat belt enforcement, and laws targeting higher-risk drivers
(high BAC and repeat offenders).
Question. Ms. Hamilton, this year NHTSA is running paid media in
concert with the impaired driving mobilizations. I am interested in
knowing if MADD was involved at all in the development of these ads and
how effective you believe they will be in getting the message out?
Answer. MADD would like to thank Senator Shelby and Senator Murray
for their leadership in this area and for providing funds for these
life-saving efforts. MADD strongly supports the expansion of well-
publicized law enforcement campaigns to curb drunk driving and increase
seat belt use. These law enforcement activities should utilize frequent
and highly visible sobriety checkpoints and/or saturation patrols.
Research and field applications have shown these law enforcement
activities to be among the most effective tools used to deter impaired
driving. The CDC found that sobriety checkpoints can reduce impaired
driving crashes by 18 to 24 percent. Checkpoints are especially
effective when coupled with media campaigns that raise the visibility
and awareness of alcohol-impaired driving enforcement efforts in the
community with the objective of deterring impaired driving before it
happens. Senate Bill 1139, introduced by Senator Mike DeWine and
Senator Frank Lautenberg, provides funding for increased enforcement
efforts across the country and if enacted will enhance the work of this
committee and result in lives saved and injuries prevented.
MADD is pleased with the quality and content of the advertising
developed for this campaign. The first deployment of this campaign will
occur from June 20 to July 13, 2003. MADD believes that raising public
awareness through a coordinated national media campaign coupled with
high visibility law enforcement (sobriety checkpoints and/or saturation
patrols) will be successful. Based on the success of the Click-it-or-
Ticket campaign and several demonstration sobriety checkpoint programs
these combined efforts have the greatest potential to save lives.
However, it is vital that DOT/NHTSA commit 100 percent to promote this
program, and they can demonstrate this commitment by ensuring that
national wire services cover the kick off press event, by aggressively
reaching out to diverse news outlets, by working closely with law
enforcement and traffic safety partners, and by evaluating results.
MADD was included in weekly NHTSA meetings that commenced
approximately 4 weeks before the mobilization kickoff. MADD had
occasional contact with NHTSA during the campaign's development did not
participate in the development of the national ad. We would welcome
more regular opportunities to work with NHTSA to ensure that these
campaigns are as successful as possible.
Question. The NHTSA budget proposes a new initiative to award
discretionary grants to States to demonstrate the effectiveness of a
comprehensive approach to reducing impaired driving. Ms. Hamilton and
Mr. Hurley, I am interested in your thoughts about this new
discretionary grant program and how effective you both believe that it
will be.
Answer. Sanctions are clearly the more effective approach to
encourage States to adopt proven highway safety laws. While incentive
programs have had some success, it is clear that--particularly with
alcohol-related traffic laws--penalties have shown greater results than
incentives. DOT estimates that the 21 Minimum Drinking Age (MDA) law
has saved thousands of lives since the national standard was put in
place in 1984. A national zero tolerance standard for youth, adopted by
Congress is 1995, was also successful in getting States to enact better
laws for underage drivers. Clearly the national .08 BAC standard,
enacted in 2000, has been much more effective than the TEA-21 incentive
program. Under the incentive program, only two States passed .08 BAC
laws. Since the national .08 standard was enacted, 22 States have
passed this important law.
In addition, DOT's proposed grant program is flawed because it is
only made available to States with the worst alcohol-related incidents,
leaving the rest of the Nation with no access to these funds. And, the
pot of money is not nearly as substantial as it should be to effect
needed change.
______
Questions Submitted by Senator Patty Murray
Question. This will be the first year that national media will be
used for the drunk driving mobilization efforts in July and December.
Ms. Hamilton, what does MADD hope that we will accomplish through these
national ads and what kind of contact has your organization had with
NHTSA during the development of this media effort?
Answer. MADD would like to thank Senator Shelby and Senator Murray
for their leadership in this area and for providing funds for these
life-saving efforts. MADD strongly supports the expansion of well-
publicized law enforcement campaigns to curb drunk driving and increase
seat belt use. These law enforcement activities should utilize frequent
and highly visible sobriety checkpoints and/or saturation patrols.
Research and field applications have shown these law enforcement
activities to be among the most effective tools used to deter impaired
driving. The CDC found that sobriety checkpoints can reduce impaired
driving crashes by 18 to 24 percent. Checkpoints are especially
effective when coupled with media campaigns that raise the visibility
and awareness of alcohol-impaired driving enforcement efforts in the
community with the objective of deterring impaired driving before it
happens. Senate Bill 1139, introduced by Senator Mike DeWine and
Senator Frank Lautenberg, provides funding for increased enforcement
efforts across the country and if enacted will enhance the work of this
committee and result in lives saved and injuries prevented.
MADD is pleased with the quality and content of the advertising
developed for this campaign. The first deployment of this campaign will
occur from June 20 to July 13, 2003. MADD believes that raising public
awareness through a coordinated national media campaign coupled with
high visibility law enforcement (sobriety checkpoints and/or saturation
patrols) will be successful. Based on the success of the Click-it-or-
Ticket campaign and several demonstration sobriety checkpoint programs
these combined efforts have the greatest potential to save lives.
However, it is vital that DOT/NHTSA commit 100 percent to promote this
program, and they can demonstrate this commitment by ensuring that
national wire services cover the kick off press event, by aggressively
reaching out to diverse news outlets, by working closely with law
enforcement and traffic safety partners, and by evaluating results.
MADD was included in weekly NHTSA meetings that commenced
approximately 4 weeks before the mobilization kickoff. MADD had
occasional contact with NHTSA during the campaign's development but did
not participate in the development of the national ad. We would welcome
more regular opportunities to work with NHTSA to ensure that these
campaigns are as successful as possible.
Question. Ms. Hamilton, how would you assess the funding levels in
NHTSA's budget that are directed toward reducing drunk driving?
Answer. NHTSA's fiscal year 2004 budget request is woefully
inadequate in terms of addressing the rising levels of alcohol-related
traffic deaths in America. NHTSA's testimony before the Committee gives
the false impression that they have increased monies for behavioral
funding in their fiscal year 2004 budget request. However, a detailed
review of their proposal shows that this is not the case.
The fiscal year 2004 request proposes $516,309,000 for behavioral
funding, however when Section 157 and 163 monies are subtracted the
amount is reduced to $294,309,000. The request includes $222 million of
TEA-21 resources for the Sections 157 and 163 grant programs formerly
appropriated in the Federal Highway Administration budget, which NHTSA
has always administered and is now requesting receipt of this funding
directly. This apparent increase is really no increase at all.
The fiscal year 2004 request is actually $250,000 less than the
fiscal year 2003 request. Additionally, only a percentage of funding
guaranteed for behavioral safety since States are able to shift this
funding to roadway safety/highway construction projects. The levels of
funding for impaired driving countermeasure programs administered by
NHTSA are reduced in the fiscal year 2004 request. The NHTSA Impaired
Driving Division budget request is significantly lower than fiscal year
2002 enacted levels ($10.9 million in fiscal year 2004 request compared
with $13.5 million fiscal year 2002 enacted).
NHTSA's State & Community Highway Safety Program drastically
reduces funds available to States for impaired driving initiatives. The
fiscal year 2004 request provides a $50 million impaired driving grant
program to a limited number of ``problem'' States to demonstrate the
effectiveness of a comprehensive approach to reducing impaired driving
and for identifying causes of weakness in a State's impaired driving
control system. This funding level is $100 million less than funds
available to States in fiscal year 2003 for impaired driving
improvements.
Question. Ms. Hamilton and Mr. Hurley, how would you assess NHTSA's
oversight of State highway safety plans and what specific changes would
you suggest to improve their accountability?
Answer. In May 2003, the General Accounting Office released a
report that determined NHTSA's ``performance based'' approach to
oversight of State and Community Highway Safety Program expenditures by
the States has not yielded measurable safety benefits. GAO states that:
`` . . . NHTSA's oversight of highway safety programs is less
effective than it could be, both in ensuring the efficient and proper
use of Federal funds and in helping the States achieve their highway
safety goals.''
Last year, members of this committee noted the disturbing increase
in alcohol-related fatalities and questioned NHTSA's pronouncements
that it would intensify its efforts to combat impaired driving. MADD
shares the concerns raised by the GAO and Congress regarding the lack
of accountability for traffic safety programs under TEA-21.
MADD asks Congress to hold the National Highway Traffic Safety
Administration, the agency's regional offices, and the States more
accountable for the expenditure of Federal highway safety funds. Our
goal is not to make their jobs more difficult. It is to recognize that
political pressures and ``flavor of the month'' traffic safety issues
can influence how dollars are spent. DOT claims that its primary goal
is to reverse the current trend, but clearly it is time for Congress to
create a more consistent process that ensures the efficient and proper
use of Federal funds to help the Nation achieve its highway safety
goals.
Some suggested changes include:
--Establish three levels of accountability: (1) NHTSA must be held
accountable--i.e., how does NHTSA spend its research and
evaluation funds, its demonstration project funds, and plan/
create a strategy for use of other expenditures from
headquarters; (2) NHTSA Regional Offices must be held
accountable--i.e., how do the Regional Offices work to assist
the States in reaching their goals; (3) State highway safety
offices must be held accountable, i.e., what kind of programs
are States spending resources on--are they research based and
do they reflect the needs in that particular State.
--Establish a memorandum of understanding between the Regional
Offices and the State highway safety offices to clearly lay out
the role of the regions and the role of the States.
--Regional Offices (RO's) should be more involved in the planning
process with the States. RO's should assist the States with:
problem identification, development of a data-driven State
highway safety plan, setting States' goals, and in the
selection of proven countermeasures/programs that will work to
meet these goals. RO's need training and expertise to assist
the States.
--State highway safety offices must create a highway safety plan that
reflects the needs in their States based on the data (i.e., if
alcohol-related deaths are high in a particular State, then
that State's highway safety plan should adequately reflect the
need to reduce alcohol-impaired driving with research-based,
proven solutions.)
--A more systematic approach should be used--as shown by the GAO--to
ensure that NHTSA and the RO's use tools (i.e., Improvement
Plans and High-Risk designation) to improve State performance.
--NHTSA and the RO's should provide the States with ``best
practices'' training and documents. NHTSA's publications and
website should be improved to reflect years of research in
terms of what works and what does not work. A catalogue of
research and resources should be available to the RO's and to
the States.
--NHTSA must do a better job to ensure that proven, effective
countermeasures are being implemented. Decades of research is
being ignored.
Question. Ms. Hamilton, as I mentioned, the Checkpoint Strikeforce
project used public awareness, saturation patrols and sobriety
checkpoints. Which of these three strategies do you believe is the most
effective in deterring drunk driving?
Answer. Sobriety checkpoints and saturation patrols coupled with a
public information and enforcement campaign have proven to be highly
effective in deterring impaired drivers. Research conducted both in the
United States and abroad indicates that the use of sobriety checkpoints
has been associated with substantial reductions in alcohol-related
crashes. In addition, checkpoints can be instrumental in the
enforcement of other traffic safety laws such as zero tolerance for
youth and graduated licensing. The use of sobriety checkpoints is
permitted in 41 States and the District of Columbia; in other States
the use of saturation patrols has been proven to be a successful
strategy. The research seems to indicate that sobriety checkpoints,
when done effectively, are the best enforcement tool because they deter
impaired driving and have a broader reach than other enforcement
methods.
As an example of the kinds of reductions that may be achieved with
a large and sustained program, the State of Tennessee conducted an
intensive sobriety checkpoint effort combined with public awareness
from April 1994 to March 1995. Nearly 900 checkpoints were conducted
and more than 140,000 drivers were checked for alcohol impairment with
nearly 800 DUI arrests. Analysis indicated a 20 percent reduction over
the number of impaired driving fatal crashes that would have occurred
with no intervention. It was estimated that there was a reduction of 9
impaired driving fatal crashes per month due to the influence of the
checkpoint program, amounting to more than 100 lives saved over the
intervention period. A check of five comparison States showed non-
significant increases in impaired-driving-fatal crashes over the same
period.
Question. Overrepresentation of repeat offenders is a public health
problem. Is NHTSA collaborating with other agencies (DHHS) to address
this problem? Any thoughts?
Answer. MADD agrees that the crime of drunk driving involving
``higher-risk'' drivers is a major public health problem. Higher-risk
drivers often are repeat offenders--people who repeatedly drive after
drinking, especially with high blood alcohol content (BAC). These
drivers are particularly resistant to changing their behavior. Most
U.S. drivers convicted of driving while intoxicated have a .15 percent
BAC or higher. A driver at .15 BAC is over 300 times more likely to be
involved in a fatal crash. While an estimated 85 percent of drivers in
alcohol-related fatal crashes don't have prior drunk driving
convictions, those who do pose a substantially greater risk of causing
an alcohol-related crash.
MADD believes that NHTSA should be working more actively with
Federal agencies--health, justice and education--to address this
serious problem. NHTSA should not have to be prompted by Congress to
utilize the best research, disciplines and expertise to combat drunk
driving. Recent evaluations of State efforts--including vehicle
impoundment and forfeiture, license plate impoundment and tagging, and
alcohol ignition interlock devices--demonstrate that a combination of
proven measures help deter higher-risk offenders. These measures,
combined with other effective tactics including license suspension and
alcohol assessment/treatment programs, provide a growing array of tools
for managing higher-risk drivers. Embracing this research, MADD has
developed a practical program for all 50 States. MADD's Higher Risk
Driver Program calls for:
--Restricting vehicle operation by these offenders by suspending
their licenses for substantial periods, impounding or
immobilizing their vehicles and requiring alcohol ignition
interlock devices on their vehicles to prevent them from
starting if the offenders have been drinking.
--Requiring these offenders to make restitution to the community and
drunk driving crash victims through fines and mandatory
incarceration and financial restitution to crash victims.
--Promoting recovery programs for offenders with alcohol abuse
problems through mandatory alcohol assessment and treatment,
intensive probation and attendance at victim impact panels.
Although most of the remedies in MADD's plan are not new, they
typically have been implemented on a piecemeal basis, producing a
system full of loopholes. Senate Bill 1141 incorporates all of these
solutions. This comprehensive approach if enacted would reduce crashes
caused by these high-risk drivers.
______
Questions Submitted to the National Safety Council
Questions Submitted by Senator Richard C. Shelby
HIGHWAY SAFETY INITIATIVES
Question. Dr. Runge's opening statement says that NHTSA has
``pledged to solve the highway safety issues confronting this Nation.''
However, other than consolidating some grant programs and a new
accounting of other grant programs, I see no new, innovative programs
included in this budget or in the reauthorization proposal that would
convince me that NHTSA is on the way to solving the highway safety
issues confronting this Nation.
Mr. Hurley, from your perspective, do you think that the SAFETEA
proposal will be successful in reducing highway fatalities? If not,
what, in your view, could be done to improve the proposal to allow us
to experience the greatest benefits?
Answer. I know that the administration's intent is clearly to save
lives, as demonstrated by their focus on primary belt laws and
significant incentives to States that enact such laws. We support the
intent of this provision. However, SAFETEA does not provide additional
specific funding for high visibility enforcement of belt and alcohol
laws, as well as targeted funds for programs that support those
enforcement initiatives. These funds need to be added to the proposal.
HIGHWAY SAFETY GRANT FUNDING LEVELS
Question. I am concerned that much of this ``increase'' in funding
for highway safety is merely the shifting of funds from Highways to
NHTSA. I have expressed this to the Secretary and still believe that we
need more information to conduct a proper analysis.
Mr. Hurley and Ms. Hamilton, have you analyzed the funding levels
proposed in the current budget and in the SAFE-TEA proposal?
Answer. The proposed $50 million in the administration budget for a
13-State demonstration program should be placed in Section 403 and
supplemented by $150 million along the lines proposed by the DeWine-
Lautenberg bill, S. 1139. This would provide adequate funding for the
fundamentally important enforcement mobilizations for safety belts and
alcohol.
SAFETY BELTS
Question. With respect to seat belt usage, Dr. Runge has said, ``we
have a model that works. For every 1 percent increase in belt use, we
get $800 million in economic costs saved, 2.8 million more people
buckling up, 276 lives saved, and reduce the severity of 6,400 moderate
to critical injuries.''
Mr. Hurley, how prudent is it to eliminate funding for ``Click It
or Ticket'' campaigns?
Given that it is the centerpiece of the Air Bag & Seat Belt Safety
Campaign, I am interested in hearing how you will move forward absent
these federally driven mobilizations and how effective you believe the
campaign will be?
Answer. The funding for national paid advertising to support the
``Click It or Ticket'' and ``You Drink and Drive. You Lose.'' Campaigns
is a direct result of the leadership of this subcommittee. We strongly
support continued funding of these initiatives because they are proven
to work. Since the Air Bag & Seat Belt Safety Campaign Mobilizations
began in May 1997, belt use nationally has increased from 61 percent to
75 percent. As Dr. Runge has estimated, that means 39.2 million more
people buckling up and 3,864 lives saved each year. Until May of 2002,
the Mobilizations primarily relied on earned media coverage by the news
media to reach those who continue to violate the belt and child
restraint laws. In large part due to the success of these
Mobilizations, most people who listen to the news are now buckled. It
should be stressed that the 75 percent use rate, while representing
remarkable progress, is a daytime measurement. The 25 percent who still
have not been reached by previous Mobilizations are inherently high
risk. They are literally twice as likely to be in fatal crashes, which
often occur late at night. The best proven way to reach this highest
risk group, particularly young males which includes many teenagers and
drunk drivers, is to target paid advertisements. These advertisements
are focused on enforcement and targeted to the broadcast media they
watch, which does not often coincide with the evening news. The funds
provided by this subcommittee enabled NHTSA to do exactly that, in
partnership with the States and the Air Bag & Seat Belt Campaign.
Eliminating these critical funds would not only end perhaps the most
proven effective initiative NHTSA has ever undertaken, but could well
put in jeopardy the hard won gains that have already been achieved.
While the Campaign and law enforcement nationwide would continue to
make best efforts at these goals using earned media strategies,
extensive research indicates that further progress would be extremely
difficult to achieve.
IMPAIRED DRIVING
Question. The NHTSA budget proposes a new initiative to award
discretionary grants to States to demonstrate the effectiveness of a
comprehensive approach to reducing impaired driving.
Ms. Hamilton and Mr. Hurley, I am interested in your thoughts about
this new discretionary grant program and how effective you both believe
that it will be.
Answer. NHTSA's initiative is likely to be effective in the 13
States that are included, but by definition, it is not likely to have
much, if any, effect on the other States and jurisdictions. This is
exactly the kind of program NHTSA should conduct as part of its Section
403 activities, but simply does not credibly address the national
impaired driving problem. After 20 years of progress, impaired driving
fatalities has increased in each of the last 3 years. This is an
unmistakable trend requiring urgent national strategies such as those
set forth in the DeWine-Lautenberg bill, S. 1139.
CHILD SAFETY SEATS
Question. For the past several years, the Committee has provided
funding for child safety seat campaigns. These campaigns have been very
successful at increasing the proper use of child safety seats while we
developed the second generation of child safety seats which are now
accompanied by LATCH systems in all new passenger vehicles to allow for
easier installation and safer car seats.
One of the reasons that this campaign has been so successful is due
to the broad base of support coming from State and local public safety
community, community activists, and private industry. Without this
coalition of support it is difficult to imagine that the campaign would
have had the effect of continued decreases in child fatalities.
Mr. Hurley, what is the Safety Council's view of how to build upon
the positive results we are seeing in child occupant protection as well
as how programs like this can be targeted in other areas to safe lives
on our roads?
Answer. Child passenger safety is a remarkable public health
success story. Car seat use, the vaccine for the leading risk kids
face, was 2 percent when Tennessee enacted the first mandatory use law
in 1977. Now, it is nearly universal for infants, excellent for
toddlers, and still lagging in booster seat use. Leadership by this
subcommittee, the National Transportation Safety Board, and many other
public and private organizations has made this possible. Correct use is
one key part of this issue. Kids don't set the level of risk they face
on the highway. Adults do that for them, hence the special obligation
we all have to get it right. In less than 5 years, the number of
Certified Child Passenger Technicians has gone from a mere handful, to
more than 30,000 today. There are very few places in the United States
where correct use assistance is unavailable.
Having said that, it is essential to focus on two issues that
sometimes get overlooked. Beginning with the air bag crisis of mid-
1990's, major efforts were undertaken to get kids properly restrained
in the rear seat, where data indicated they are 35 percent better
protected, with or without a front passenger air bag. With the advent
of advanced air bag systems beginning in September 2003, there is a
very real concern that some of the hard won gains may be lost to the
implied but false message that is OK to put kids back in the front
seat. It will take all of our collective efforts to re-imprint on a new
generation of parents that proper restraint in the back seat, where
possible, is still the best advice. Second, there has been a 20 percent
reduction in child passenger fatalities in the last 5 years. While
correct use is essential, it is critical to point out that most child
passenger fatalities come not from incorrect use, but rather non-use.
The clear majority of child passenger fatalities are completely
unrestrained, far more often with unbelted drivers. And the leading
risk children face from drunk drivers is as passengers of the drunk
driver themselves. There is simply no excuse for these findings. The
greatest proportion of the 20 percent reduction in child passenger
fatalities has come from high visibility zero tolerance enforcement of
seat belt, car seat, and drunk driving laws. Through the leadership of
this subcommittee, we are very hopeful that funding will be provided to
continue these lifesaving efforts.
______
Questions Submitted by Senator Patty Murray
NHTSA'S INCENTIVE PROGRAM AND PRIMARY SEAT BELT LAWS
Question. When the Federal Government has tried to get the States
to enact meaningful safety laws, it has taken two approaches. In some
instances, like the Minimum Drinking Age Act and the 0.08 law, we have
withheld highway construction funds from States that don't pass the
law. In other instances, we have provided incentive payments to get
States to make safety improvements. The record is clear, when we
sanction highway construction funds, all the States eventually comply.
When we provide incentive payments, the record is quite mixed. NHTSA's
own data show that seat belt use increases as much as 15 percent in
States that have primary seat belt laws on the books. Currently, 18
States and the District of Columbia have primary seat belt laws in
effect, including my own State of Washington. Yet, the 2004 budget
request includes $100 million for a new primary seat belt incentive
grant program. This program is designed to encourage the remaining 32
States to pass a primary seat belt law.
Mr. Hurley, how confident are you that States will pass a primary
seat belt law as a result of this grant program?
Answer. We are very hopeful at the Air Bag & Seat Belt Safety
Campaign that the $100 million proposed by the administration will
help, but not guarantee the passage of more primary belt laws. The
fiscal situation in most States has increased their interest in
incentives such as the one being proposed. In Illinois, where Campaign
support was successful in helping Illinois to pass a primary law, the
prospect of significant Federal incentive funds was very helpful, but
not the primary factor for passage. In Florida, and Massachusetts, the
funds increased the priority of the issue, but were not in themselves
sufficient to overcome opposition to primary belt legislation. While we
fully support the proposal, the National Safety Council also supports
highway trust fund sanctions in the final year of the upcoming
reauthorization of the highway program.
MOTORCYCLE FATALITY INCREASES
Question. Motorcycle deaths have gone up every year since 1997 and
the deaths of older cyclists have been rising for an even longer
period. The early estimates for 2002 indicate that the overall number
of motorcycle fatalities increased by 3 percent over 2001. And while
the number of fatalities for younger riders decreased, for riders over
the age of 50, there was an astounding 24 percent jump in the number of
motorcyclists killed.
Mr. Hurley, where do you think NHTSA should concentrate its efforts
to improve motorcycle safety?
Answer. The three areas where NHTSA should concentrate its efforts
are: (1) defining through evaluation the contribution of repeal of
helmet laws to the increased fatalities by State and nationally, (2)
defining through peer reviewed evaluation the extraordinary taxpayer
subsidies to injured motorcyclists, such as the Harborview study of 10
years ago that found the costs of caring for injured motorcyclists at
64 percent paid by the taxpayers, and (3) defining through evaluation
and reducing through enforcement the frequency of alcohol impaired
motorcycle fatalities and injuries.
NHTSA'S PAID ADVERTISING PROGRAM
Question. Over the last few years, this subcommittee provided
funding for paid media to support the highly successful ``Click It or
Ticket'' program. In fact, the national ads for this program have been
running this month during the seat belt mobilization campaign. This
year, we expanded the program to include national media for the drunk
driving mobilizations that will occur in July and December.
Dr. Runge and Mr. Hurley, what kind of feedback have you been
getting about the ``Click It or Ticket'' ads?
Answer. The feedback on the advertising has been overwhelmingly
positive. The Air Bag & Seat Belt Safety Campaign conducts both pre-
and post-public opinion surveys before and after each Mobilization.
There is now tracking data spanning the past 7 years.
Unaided recall of ``Click It or Ticket'' among all Americans jumped
from 6 percent in the pre-test to 28 percent after the Mobilization.
(Unaided recall means respondents could say with no prompting that the
seat belt enforcement effort they had heard of was ``Click It or
Ticket'' in an open end question.) Among the target audience of men 18-
34, unaided recall of ``Click It or Ticket'' moved 30 percentage points
from the pre-survey of 12 percent to the post-survey of 42 percent.
More importantly, recall of the ad is linked to higher recall of
key campaign success measures such as perceived likelihood of getting a
ticket for not wearing a seat belt and the perception that police are
more aggressively enforcing seat belt laws. For the first time, there
was a statistically significant increase in the percentage of men 18-34
who said their seat belt use had increased in the past 6 months. This
age group is one of the hardest to reach with this type of public
health message, according to researchers.
We also found clear evidence that cumulative advertising over
repeated Mobilizations increases the overall effectiveness of the
Mobilizations and the impact on key campaign success measures. These
measures were all higher in States where paid advertising has run for
consecutive years compared to States where paid advertising ran only in
May 2003.
It's clear from this data that the ad campaign was effective in
reaching and influencing our target audience.
NHTSA'S OVERSIGHT OF STATE SAFETY PROGRAMS
Question. The second word in the administration's SAFETEA proposal
stands for ``accountable.'' Yet, the recent report released by the
General Accounting Office draws the conclusion that NHTSA has been
inconsistent in holding the States accountable for their highway safety
programs. The GAO reported that NHTSA's use of management reviews
varied from region to region and that the regional offices have made
limited and inconsistent use of improvement plans. While some States
may do a good job at meeting their safety objectives, it is clear that
others may benefit from greater input and guidance from NHTSA.
Ms. Hamilton and Mr. Hurley, how would you assess NHTSA's oversight
of State highway safety plans and what specific changes would you
suggest to improve their accountability?
Answer. The recent GAO report lays out very well the critical need
for effective oversight by NHTSA of federally funded State programs. It
simply was a mistake for NHTSA to unilaterally give up State plan
approval. For the best performing States, the plan approval process
should be minimal, with the emphasis on how NHTSA can best assist the
achievement of excellence. For the middle tier States, the plan
approval should make sure that scarce funding is only spent on those
things proven to work. For the bottom performing States, there should
be extensive review of the State programs, beginning with the data.
Where States are unwilling or unable to meet reasonable objectives,
there should be consideration of what other delivery mechanisms can
best meet critical needs.
COORDINATED GOVERNMENTAL EFFORT TO FIGHT DRUNK DRIVING
Question. Roughly one-third of all drivers arrested or convicted
for DUIs or DWIs were repeat offenders. These individuals are over-
represented in fatal crashes and less likely to be influenced by
education or legal sanctions. Given that these hard-core drinkers are
probably the toughest individuals to reach, it seems that there ought
to be a coordinated governmental effort to reach them. Last year, we
directed NHTSA to work with the Attorney General's office to identify
the best strategies to reduce plea bargaining and to make sure that
impaired driving convictions are applied in a consistent manner. Beyond
that, I think it is important that we look at the public health aspects
of this problem to make sure that people are getting the treatment that
they need. I know that NHTSA spoke to the National Institute on Alcohol
Abuse and Alcoholism in February about how the two agencies might work
together on this very challenging problem.
Mr. Hurley and Ms. Hamilton, do you have any thoughts you would
like to add?
Answer. Perhaps the most critical piece missing in the current
effort to reduce drunk driving is now being implemented through the
leadership of this subcommittee. The advent of national paid
advertising to support coordinated enforcement will likely have
substantial results. In North Carolina's ``Booze It and Lose It''
Campaign in 1995, arrests of intoxicated motorists at nighttime
checkpoints were cut by more than half, to .87 percent. This remains
one of the lowest levels ever achieved in this country. The National
Safety Council also fully supports MADD's Hard Core Drunk Driver
Initiative.
BLUE RIBBON COMMISSION ON HIGHWAY SAFETY
Question. The administration's SAFETEA proposal includes a total of
$7 million over 6 years for a National Blue Ribbon Commission on
Highway Safety. The purpose of this safety commission is to study the
Nation's highway safety needs and to make recommendations on how to
reduce highway fatalities. The final report of the Commission would be
delivered as late as February 1, 2009.
I'd like the entire panel to answer this question. Given what we
know about the benefits of seat belts, tough drunk driving laws, and
strong vehicle safety standards, why do we need 6 years and $7 million
to study a problem to which we already know the solutions?
Isn't this Commission just an excuse to put off meaningful action
on the safety remedies that we already know work?
Answer. The National Safety Council believes that most national
commissions have not delivered on their promise, requiring far more
work and yielding few tangible results. One clear exception was
President Reagan's Drunk Driving Commission which consolidated what was
known and proven to work, providing a blue print for progress for the
next 20 years. As Sen. Murray indicated, commissions are often a
convenient way of postponing critical decisions, rather that enabling
real progress to occur.
Much of what is necessary for reducing fatal and serious injuries
on the highway is known in the peer review literature. What is lacking
is often the political will to bring about progress. Commissions are a
weak lever on political will. Before allowing such an initiative to go
forward, thorough discussion and debate should take place on the
Commission's precise leadership, membership, and scope. The Commission
should also be strictly focused on only those efforts that have been
proven to work.
CONCLUSION OF HEARINGS
Senator Campbell. So I appreciate you appearing here, and
the subcommittee is recessed. Thank you.
[Whereupon, at 11:58 a.m., Thursday, May 22, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on Transportation, Treasury and General
Government, and Related Agencies for inclusion in the record.
The submitted materials relate to the fiscal year 2004 budget
request.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule hearings for
nondepartmental witnesses.]
Prepared Statement of the National Association of Railroad Passengers
The National Association of Railroad Passengers is a non-partisan
organization funded by dues and contributions from approximately 16,000
individual members. We have worked since 1967 to support improvement
and expansion of passenger rail, particularly intercity passenger rail.
We strongly support Amtrak's request for $1.812 billion in fiscal
2004. We recognize the constraints placed on your ability to find
funding for all transportation needs while forced to operate in an
environment dominated by guaranteed spending programs. Nevertheless, we
believe the committee has an obligation to develop a policy that puts
more balance in the nation's transportation system. Minor (or even
major) reductions in Amtrak's route structure would not yield any
meaningful savings for a couple of years but would drain energy--at
Amtrak, on Capitol Hill, and in the executive branch--away from the
productive efforts David Gunn has initiated to ``reform'' Amtrak from
within.
One cannot overstate the importance of his efforts to get Amtrak to
a ``state of good repair'' for the first time ever. This effort--
combined with capital improvements such as recent track work on the
Chicago-St. Louis line and signal improvements on part of the Chicago-
Detroit line--could produce very impressive ridership, even before
there are any results from the much-needed higher speed rail program
that we expect the authorizing committees to approve outside the
regular appropriations process.
We appreciate that the Bush Administration's request for $900
million is 73 percent higher than its $521 million request for fiscal
year 2003, but this would be a 14 percent cut from what Amtrak received
in fiscal year 2003, and is only half of what Amtrak says it needs in
fiscal year 2004. It has been said that $900 million nonetheless
represents an increase over ``average'' funding levels of the past ten
years--but Amtrak's delicate financial situation today is a direct
result of inadequate funding through much of that period, and Amtrak's
2004 request of $1.812 billion is meant to start to make up for those
past deficiencies. Looked at another way, $900 million is 40 percent
below the inflation-adjusted average for 1982-1984.
More recently, between fiscal year 1997 and 2002, Amtrak averaged
$1.1 billion a year in federal funding, with much of that coming
through the Taxpayer Relief Act of 1997 (TRA), which provided Amtrak
with $2.2 billion outside of the appropriations process.
public wants more travel choices, not fewer
Although public support for passenger rail was well established
before September 11, 2001, as reflected in polls discussed near the end
of this statement, the 9/11 catastrophe focused and energized public
interest in having more transportation choices, not fewer, and thus in
retaining and improving our national passenger rail network.
Because of the combined impacts of the ``airport hassle'' factor
and fear of flying, people who formerly flew to avoid four-hour ground
trips now accept ground trips of about eight hours in order to avoid
flying. Ironically, the majority of those trips are by car even though
plane travel remains far safer than driving. Where good train service
is offered in such markets, business is thriving even in the face of a
weak travel and tourism industry. The public--by its purchase of
tickets--has shown that it will ride conventional-speed services in
large numbers in many markets. Such trains need not come anywhere near
the speed of a TGV; they need only be reasonably fast and reasonably
frequent to be attractive to many travelers. This is not to deny the
importance of continuing to work towards world-class high speed rail,
particularly in longer corridors.
During the first seven months of Fiscal 2003 (October-April), the
following services posted travel increases in the face of extraordinary
weakness in the travel and tourism markets. The percentages shown are
increases in passenger-miles compared with the year-earlier period.
(The passenger-mile--one passenger carried one mile--is the standard
measure of intercity travel.)
--Chicago-Grand Rapids, +30.7 percent.
--New York-Pittsburgh Pennsylvanian, +21.1 percent. \1\
---------------------------------------------------------------------------
\1\ Primarily the result of restructuring the train to run at
``passenger-friendly'' rather than ``freight-friendly'' times.
---------------------------------------------------------------------------
--Boston-Portland Downeaster service, +12.5 percent.
--Pacific Surfliner (primarily San Diego-Los Angeles-Santa Barbara),
+10.6 percent.
--Chicago-New Orleans City of New Orleans, +9.7 percent.
--San Joaquin Valley Service, +7.6 percent.
--New York-Charlotte Carolinian, +7.2 percent.
--Chicago-Carbondale Illini, +7.1 percent.
--Chicago-Quincy Illinois Zephyr, +6.7 percent.
--Sacramento Area-Bay Area-San Jose, +6.5 percent.
--Chicago-Seattle/Portland Empire Builder, +5.9 percent.
--Chicago-St. Louis, +5.8 percent.
Reflecting the relationship between an aging population and
interest in alternatives to driving, the American Association of
Retired Persons in its new ``Public Policies 2003'' states: ``Congress
should support nationwide passenger rail service that is integrated and
coordinated with regional, state and local passenger rail [and should]
establish a dependable funding mechanism that insures continuing
passenger rail service.''
ANALYZING ROUTE FINANCIAL PERFORMANCE
DOT Inspector General Kenneth Mead, in February 27, 2002, testimony
before a House appropriations subcommittee, called operating grants
needed for long-distance trains (what we call national network trains)
``chump change'' compared with ``the annual capital subsidy required to
continue operating'' Northeast Corridor trains. He said national
network operating losses are only about 30 percent of NEC capital
requirements.
We offer the following comments about measurements:
First, the passenger mile--one passenger traveling one mile--is the
standard measure of intercity travel. Trip lengths vary widely and use
of the passenger-mile reflects that. Thus, subsidy per passenger-mile
is a more meaningful way to measure the relative efficiency of Amtrak's
routes. To illustrate how results can differ, the fiscal year 2001 data
in the Amtrak Reform Council final report showed that the Southwest
Chief had the fifth best operating ratio but the fifth worst subsidy
per passenger. (Operating ratio--costs divided by revenues--is another
good way to measure economic performance.)
Second, the absolute numbers that have been widely quoted, though
they exclude depreciation, are based on fully allocated costs
(including, for example, a share of the Amtrak CEO's expenses) and thus
exceed savings that might be realized by discontinuing a specific
route.
Third, the Sunset Ltd. in particular has been hampered by
exceedingly poor on-time performance, much of which is related to heavy
track work on a largely single-track railroad as Union Pacific has
worked to eliminate deferred maintenance on former Southern Pacific
lines. There is hope for improvement. Union Pacific Chairman and CEO
Dick Davidson, Railway Age magazine's ``Railroader of the Year,'' is
quoted in their January issue saying, ``We do want to be a good partner
with Amtrak, and we're doing our best to get our railroad upgraded on
the Amtrak routes and work with them to improve performance.''
Finally, our Association strongly believes that the existing
network is a skeletal foundation, from which the system should grow,
and that all the routes that ``should'' be discontinued--and some that
should not have been--have already been discontinued. Thus, the only
purpose for ranking routes would be to identify where special actions
might be needed to improve performance, not to identify routes for
discontinuance.
We question the relevance of the planning process used to
restructure the Northeast rail freight network in the 1970s. That
network was dense and arguably overbuilt, so that it was easy to take
out many route miles without harming major markets. The Amtrak network
by contrast is skeletal. The ability to take out individual routes
without collapsing the system is limited because of the
interrelationships among the routes in terms of shared revenues
(connecting passengers) and shared costs (common facilities).
EXAMPLES OF IMPROVED EFFICIENCY AT ``GUNN'S AMTRAK''
Gunn and his key people have impressive knowledge specific to
railroading and to budget discipline, which appears to be paying off
already.
One change visible to passengers is the now-consistent, dining-car
requirement that sleeping-car passengers sign their names and room
numbers. Meals are included in the sleeping-car charge, but not in
coach fares. Reinstitution of the signature process--and an audit
(comparing dining car checks with passenger manifests)--aims to
determine more accurately food/beverage revenues and costs and to help
eliminate abuse (e.g., coach passengers getting free meals).
Amtrak is fixing, scrapping or selling equipment that has been out
of use, realizing that there is a cost to the indefinite storage of
such equipment. Elderly, costly-to-maintain coaches have been kept in
service (especially on the New York-Philadelphia ``Clockers'') while
modern equipment that needed only minor repairs was sidelined; Amtrak
is undertaking those minor repairs.
Amtrak is making good use of sizable inventories left over from
previous projects cut short by funding shortages. For example, Amtrak
has found orange upholstery to use when overhauling coaches with ratty
old upholstery of the same color. The end result may not be the color
one would have chosen for the new century, but it will be clean and
new--and did not require any new purchase.
Amtrak is covering a lot of old carpeting with plastic, which is
easier to clean and doesn't hold dirt, odor, or splashed coffee.
A new frequency--the 10th Acela Express on the New York-Boston
run--was added January 27 without increasing crew costs.
Amtrak's organizational structure has been flattened by elimination
of the Eastern and Western general manager positions, so that the seven
divisional general superintendents now report directly to the vice
president of operations.
Amtrak announced January 24 that it would close its Chicago call
center, the smallest of its three centers, at the end of December. Even
if the number of agents added at empty desks in Riverside and
Philadelphia equals the number of agent positions eliminated in
Chicago, Amtrak expects to save $3 million a year in management,
facility and technology costs. Any net reduction of agents--such as
might be possible because of the continuing migration of business to
the internet--would increase the savings.
APPENDIX I.--POLLS INDICATE PUBLIC SUPPORT FOR PASSENGER RAIL
Polls over the years have consistently shown public support for
faster, more frequent, and reliable passenger trains, including two
national polls last summer. A poll conducted by CNN/Gallup/USA Today
near the height of Amtrak's June, 2002, cash crisis (June 21-23) found
that 70 percent of the public support continued Federal funding for
Amtrak. Similarly, The Washington Post found that 71 percent of
Americans support continued or increased federal funding for Amtrak
(August 5, 2002, article reporting on July 26-30 poll).
An October 27, 1997, nationwide Gallup Poll sponsored by CNN and
USA Today asked whether ``the federal government should continue to
provide funding for the cost of running Amtrak, in order to ensure that
the U.S. has a national train service, or the federal government should
stop funding Amtrak, even if that means the train service could go out
of business if it doesn't operate profitably on their own.'' Favoring
continued funding were 69 percent of respondents, with 26 percent
against (and 6 percent other responses). State-specific polls also have
been positive.
Wisconsin
A poll by Chamberlain Research Consultants of Madison, released by
the Wisconsin Association of Railroad Passengers in June, 2002,
indicated that
--77 percent of Wisconsin residents ``support a nationwide system of
passenger trains with increased routes, frequencies, and
shorter travel time.''
--76.6 percent said they would use the trains if the planned nine-
state Midwest Regional Rail network becomes available to them.
--54.3 percent responded positively to this question: ``If federal
funding is available for improving intercity passenger rail
services, Wisconsin may try to attract these rail improvement
funds by pledging to pay for a portion of the project with
state money as we do now with highway and airport projects. Is
this something you favor, oppose, or neither favor nor oppose
as a way to raise money to develop passenger rail services in
Wisconsin?''
The survey, which was conducted over a week-and-a-half ending in
mid-February, took place as the future of Amtrak and the need for a
nationwide rail passenger service was being debated by Congress, and as
Wisconsin state government wrestled with its most serious financial
crisis ever. More information is available at http://www.wisarp.org.
Ohio
The Ohio State University Center for Survey Research (OSU-CSR)
released a poll (``Tracking Ohio'') on March 8, 2001, which found that
80 percent of Ohioans want the state to develop passenger rail service.
The following question produced a 74 percent positive response: ``If
Ohio had a modern, convenient and efficient passenger rail network, do
you think it would improve the quality of life in Ohio or would it have
no effect?'' About two-thirds (65 percent) of respondents said state
money should be used to attract federal passenger-rail funding to Ohio,
if such federal funding were available. More than half (53 percent)
said the best way to relieve road traffic congestion is to ``improve
all forms of transportation including mass transit and high-speed
rail.'' The statewide poll was conducted by telephone January 2-31,
2001, as part of the OSU-CSR's monthly Buckeye State Poll. The margin
of sampling error was no more than +/-4.3 percent.
New York
In 1998, the Marist College Institute for Public Opinion
(Poughkeepsie) released results of a poll it conducted of New York
State registered voters regarding state investment in intercity rail
passenger service (trips longer than 75 miles one way). Findings: 82
percent believed that having modernized intercity passenger train
service is at least as important as having good highways and airports
(of this figure, 12 percent felt rail service was even more important);
87 percent favored an increase in government spending for intercity
passenger train service. The poll was based on approximately 600
responses with a margin of error of no more than
+/-4 percent. It was commissioned by the Empire State Passengers
Association and the Empire Corridor Rail Task Force.
APPENDIX II.--BENEFITS OF AMTRAK AND PASSENGER TRAINS
In crowded corridors, passenger trains represent vital people-
moving capacity and help relieve air and road congestion. This benefit
will grow over time as travel demand continues to grow while airport
and highway construction face more intense local opposition and ever-
tighter limits on funding and sheer availability of land.
Amtrak is far safer than auto travel.
During inclement weather, Amtrak is safer and usually more reliable
than airplanes and buses. Amtrak was the only thing going in the
Northeast in the recent President's Day storm.
In most cities, Amtrak helps mass transit, downtown areas and
transit-dependent people by serving--and increasing the visibility and
economic viability of--transit-accessible downtown locations. Amtrak
feeds connecting passengers to transit. Amtrak shares costs with
transit at joint-use terminals and on joint-use tracks. Positive
impacts have been observed even in small cities with minimal Amtrak
service. Mayor John Robert Smith of Meridian, Miss., on Amtrak's New
York-Atlanta-New Orleans run (one train per day in each direction),
says property values have tripled in recent years around the railroad
station, site of a relatively new intermodal terminal.
By contrast, new airports intensify energy-inefficient suburban
sprawl and stimulate auto-dependent development. This leads to the
social costs of getting transit-dependent people to work, or the need
to address the consequences of their not working.
Amtrak is important to those who cannot fly due to temporary or
permanent medical problems, and to those for whom physical and
financial considerations rule out driving long distances, for example,
seniors and students. (The editor of Frequent Flier, forced by doctor's
orders to take the train to Florida, wrote a favorable column about the
trip.) Indeed, some of those medical problems have come about as a
result of flying.
Amtrak serves many communities where alternative transportation
does not exist, is not affordable or only serves different
destinations. Trains can make intermediate stops at smaller cities at
minimum cost in energy and time. This is apparent in corridors--where
benefits go to such cities as Jefferson City, Lancaster, Trenton,
Kalamazoo, Wilmington, Bloomington/Normal and Tacoma. It also means,
for example, that the Empire Builder can stop at eight small cities in
Washington (plus Seattle and Spokane), 12 in Montana and seven in North
Dakota without compromising the train's appeal to those riding between
Chicago or Minneapolis and Seattle or Portland. Similarly, the
California Zephyr serves five Colorado points (plus Denver) and five
points each in Iowa and Nebraska. Also, Amtrak serves 14 North Carolina
points.
Here is an example of long-distance travel that I encountered on
the Southwest Chief: a mother and her 14-month-old child rode from
Garden City, Kansas, to Barstow, California. The family was moving to
California; the husband was driving the U-Haul; the wife and child were
on the train ``so the move would not be so traumatic'' for the child.
They did not consider the plane because they felt it would be too
cramped for the child. Also, airfare out of Garden City was
prohibitive.
Amtrak is part carrier (like United and Greyhound) and part
infrastructure. Thus Amtrak provides important passenger-moving
capacity, unlike airlines and bus companies. In much of the Northeast
Corridor and a few other places, Amtrak is the rail equivalent of the
air traffic control system, airport authorities and airlines. (Among
the ``other places'': the Chicago terminal, part of the Chicago-Detroit
line and the track between Albany, New York, and the Massachusetts
state line.) Elsewhere, Amtrak is the only carrier with legal access to
freight railroads' tracks--a quid pro quo for relieving the railroads
of their passenger-train obligations in 1971.
Amtrak's national network trains are transportation ``melting
pots.'' Intercity travelers by all modes had an average annual income
of $70,000. The comparable figure for travelers on Amtrak's national
network trains is $51,000. [This is 1999 data inflated to 2002 and thus
probably good for 2003 as well.] However, the majority of passengers on
these trains ride coach. Surveys available to us six years ago
indicated that, for 30 percent of coach passengers traveling over 12
hours, average income was less than $20,000 (for 11 percent, it is less
than $10,000). Obviously, most standard- and deluxe-room sleeping car
passengers have considerably higher incomes and pay much higher fares.
Nonetheless, anyone who characterizes these trains as land versions of
cruise ships should try walking the coaches, especially at night.
Trains, especially on longer trips, offer a form of social contact
almost lost in this country today--the opportunity to meet and relax
with total strangers that one may or may not ever see again.
Amtrak over much of its network enables one to enjoy gorgeous
scenery in total comfort. Some examples: the Connecticut and California
coastlines, the Hudson River in New York, the Colorado Rockies, the
mountains of Vermont and northern New Mexico, Glacier Park in Montana
and West Virginia's New River Gorge.
Amtrak uses only 79 percent of the energy airlines use to move a
passenger a mile, and only 22 percent of the energy general aviation
uses (to do the same). This statement is based on the following 2000
data from the Oak Ridge National Laboratory's annual Transportation
Energy Data Book (Edition 22, published September 2002) and available
on-line: Amtrak--2,902 British thermal units per passenger-mile;
Airlines--3,666; General aviation--12,975. Just two years earlier, in
1998, Amtrak was at 2,441. Amtrak is much less polluting than
airplanes. (Energy efficiency is a good proxy for air pollution.)
Thanks to a growing array of connecting buses available with train
travel in a single ticket transaction, Amtrak puts people on intercity
buses who would not otherwise have considered using them. ``Thruway''
is Amtrak's copyrighted name for connecting buses that can be booked
and ticketed through Amtrak's reservation system. Thruways first
developed in a big way in California, where the state underwrites an
impressive network of dedicated, feeder buses. Elsewhere, depending on
the situation, Amtrak or the private bus companies themselves bears the
financial risks for many Thruway runs themselves.
APPENDIX III.--SUBSIDIES
Virtually all federal spending on highways is generated from user
fees. However,
--Federal policy helps encourage states and local governments to
spend primarily on highways and aviation, where federal funds
cover 50-80 percent of project costs, and not on railroads,
where federal funding generally is zero.
--A total of $34 billion in 2001 highway spending came from non-user
sources in all levels of government (while $10 billion in
highway user payments went to ``nonhighway purposes'' (Table
HF-10, Highway Statistics 2001).
--A mode-specific trust fund system insures massive continued
investment in the modes that are already dominant, regardless
of whether they are the best solution for tomorrow's
transportation problems, and regardless of the needs of the
users paying those taxes. A large proportion of them are soon
to be senior citizens who will place greater value on non-
automobile travel choices.
--User fees clearly do not cover environmental and other external
costs associated with highways and aviation.
The proportion of general funds covering FAA Operations grew by
about $2 billion from fiscal year 2002 to fiscal year 2003 and now
represents about half of FAA Operations costs. As to airport
construction is done through public rather than private finance. The
savings associated with financing an airport project with tax exempt,
government-backed bonds rather than with commercial loans sought
directly by the airlines is substantial. The various sources available
to fund airports, like the mode-specific trust fund system, fall into
the category of reinforcing the dominance of modes that are already
dominant whether or not they offer the best solution for today's
transportation problems.
______
Prepared Statement of the People for the Ethical Treatment of Animals
(PETA)
Chairman Shelby, Ranking Member Murray, and Members of the
Subcommittee: People for the Ethical Treatment of Animals (PETA) is the
world's largest animal rights organization, with more than 750,000
members and supporters. We greatly appreciate this opportunity to
submit testimony regarding the fiscal year 2004 appropriations for the
Department of Transportation (DOT). Our testimony will focus on
chemical tests allowed or required by the DOT to be conducted on
animals.
As you may know, the DOT requires hazardous materials to be
categorized and labeled for shipping. Traditionally, a chemical's
dermal corrosive potential has been estimated by applying the substance
to the shaved, abraded skin of animals. Fortunately, there are non-
animal test methods that are just as effective. Human skin equivalent
tests such as EpiDermTM and EpiSkinTM have been
scientifically validated and accepted in Canada, the European Union,
and by the Organization for Economic Cooperation and Development (OECD)
(of which the U.S. is a key member) as total replacements for animal-
based skin corrosion studies. Another non-animal method,
CorrositexTM, has been approved by the U.S. Interagency
Coordinating Committee on the Validation of Alternative Methods.
However, the DOT continues to allow the use of animals in many skin
corrosion studies, despite the availability of data from validated,
non-animal tests.
In 2000, PETA discovered that the DOT was using rabbits for
corrosivity tests for which, according to the agency's own guidelines,
CorrositexTM could have been used instead. In 2001, at
PETA's urging, the DOT's Office of Hazardous Materials Enforcement
added language to its operation procedures requiring that DOT staff
arranging for testing of materials ``inform the prospective laboratory
that you want testing to be conducted using the CorrositexTM
testing protocol, when testing using animals is not required. Advise
the laboratory that testing using animals is to be conducted only when
absolutely necessary.''
We were glad to see that change in policy. However,
CorrositexTM is not considered sufficient by the DOT to test
all of the hazardous materials for which the agency requires
corrosivity tests. According to the DOT's policy,
CorrositexTM can only replace animal tests for organic and
inorganic acids and bases as well as acid derivatives. PETA would like
the agency to require the use of EpiDermTM and
EpiSkinTM so that all of the hazardous materials could be
tested for corrosivity with non-animal methods. The cruel rabbit tests
for corrosivity are no longer necessary in any situation.
Secondly, to our knowledge, there is no DOT policy of enforcement
to ensure that only non-animal methods are used. Therefore, we are
requesting that the subcommittee include report language ensuring that
no funds for the DOT (including salaries or expenses of personnel) may
be used for the purpose of assessing data from an animal-based test
method when a non-animal test for the desired endpoint has been
validated and/or accepted by the OECD or its member countries.
ANIMAL TESTS CAUSE IMMENSE SUFFERING
Traditionally, the degree to which corrosive materials are
hazardous has been measured by the very crude and cruel method of
shaving rabbits' backs and applying the test substance to the animals'
abraded skin for a period of hours. As one can imagine, when highly
corrosive substances are applied to the backs of these animals who are
not given any anesthetics or analgesics, the pain is excruciating.
THE RELIABILITY AND RELEVANCE OF ANIMAL TESTS TO HUMAN BEINGS IS
QUESTIONABLE
The assessment of damage to the rabbits' skin is highly subjective
and variable, which limits the reproducibility of the animal test
(which, unlike non-animal tests, has never been scientifically
validated). One study, which compared the results of rabbit tests with
real-world human exposure information for 65 chemicals, found that the
animal test was wrong nearly half (45 percent) of the time in its
prediction of a chemical's skin damaging potential (Food & Chemical
Toxicology, Vol. 40, pp. 573-92, 2002).
VALIDATED METHODS EXIST WHICH DO NOT HARM ANIMALS
Fortunately, non-animal test methods, such as EpiDermTM,
EpiSkinTM, and CorrositexTM, have been found to
accurately predict chemical corrosivity without harming animals. In
fact, although the DOT continues to accept data from animal tests, the
agency specifically allows an exemption from animal testing for organic
and inorganic acids and bases as well as acid derivatives if
CorrositexTM tests are used instead. The DOT has the power
to allow a similar exemption for EpiDermTM and
EpiSkinTM so that no animal tests would be required for any
of DOT's skin corrosivity data needs.
EpiDermTM and EpiSkinTM are comprised of
human-derived skin cells, which have been cultured to form a multi-
layered model of human skin. The CorrositexTM testing system
consists of a glass vial filled with a chemical detection fluid capped
by a membrane, which is designed to mimic the effect of corrosives on
living skin. As soon as the corrosive sample destroys this membrane,
the fluid below changes color or texture. Users simply record the time
it takes for the sample to break through the membrane. Then, depending
on their needs, they can assign the proper U.N. Packing Group
classification for DOT compliance, or use the data to substantiate
marketing claims.
NON-ANIMAL TEST METHODS SAVE TIME
Unlike animal testing that can take two to four weeks,
CorrositexTM testing can provide a Packing Group
determination in as little as three minutes and no longer than four
hours.
THE DOT CONTINUES TO ALLOW THE USE OF ANIMALS
From materials obtained through the Freedom of Information Act,
PETA learned that the DOT itself has used rabbits to test the
corrosivity of products whose labeling accuracy was questioned by a
competitor.
Listed below are some of the products that the DOT has tested on
animals.
------------------------------------------------------------------------
Name of Product Results
------------------------------------------------------------------------
Spoke Wheel Cleaner....................... Full-thickness skin
destruction.
Whitewall Cleaner......................... Full-thickness skin
destruction.
Savage Acid............................... Full-thickness skin
destruction.
Goodbye Graffiti.......................... Full-thickness skin
destruction.
Heavy Duty Spoke Wheel Cleaner............ Full-thickness skin
destruction.
Amazing Rust Stain Remover................ Full-thickness skin
destruction.
Oxalic Acid............................... Tissue necrosis.
------------------------------------------------------------------------
SUMMARY
The skin corrosivity of all the products listed above could--and
should--have been measured using CorrositexTM,
EpiDermTM, or EpiSkinTM. There simply is no
excuse for causing this kind of suffering to animals when three fully
validated non-animal tests are available.
We therefore hereby request, on behalf of all Americans who care
about the suffering of animals in toxicity tests, that you please
include language in the report accompanying the fiscal year 2004
Transportation, Treasury and General Government Appropriations bill
stating that no funds for the DOT (including salaries or expenses of
personnel) may be used for the purpose of assessing data from an
animal-based test method when a non-animal test for the desired
endpoint has been validated and/or accepted by the OECD or its member
countries.
Thank you for your consideration of our request.
______
Prepared Statement of the Coalition of Northeastern Governors
Dear Mr. Chairman: As the Subcommittee begins the fiscal year 2004
transportation appropriations process, the Coalition of Northeastern
Governors (CONEG) is pleased to share with the Subcommittee testimony
on the fiscal year 2004 Transportation and Treasury Appropriations
bill. The CONEG Governors commend the Subcommittee for its past support
of funding for the nation's highway, transit, and rail systems.
Although we recognize the extensive demands being made upon federal
resources in the coming year, we urge the Subcommittee to continue the
important federal partnership role that is vital to strengthening the
multi-modal transportation system. This system is a critical
underpinning to the productivity of the Nation's economy and the
security and well-being of its communities.
First, the Governors urge the Subcommittee to fund the combined
highway, transit and safety programs at levels that will continue the
progress made over the last several years to improve the condition and
safety of the Nation's highways, bridges and transit systems. In both
urban and rural areas, these infrastructure improvements are not only
necessary for moving people, but are also critical for improving the
projected substantial growth of freight movements along the Nation's
surface transportation system. The U.S. Department of Transportation's
2002 Conditions and Performance Report to Congress documented the
improvements in the physical condition of the nation's highway, bridge
and transit infrastructure as a result of the federal-state investments
made under the Transportation Equity Act for the 21st Century (TEA-21).
It also found that a combined federal highway and transit program of
$53 billion annually is needed simply to maintain our Nation's highways
and transit systems in the current conditions, and a program level of
$74.8 billion is needed to actually improve our Nation's highways and
transit systems.
Within the Transit program, the Governors strongly urge the
Subcommittee to address the solvency of the mass transit account while
maintaining the basic program structure. Further, the Governors urge
the Subcommittee to continue the traditional 80/20 federal/state match
for the New Start Program and the Bus and Bus Facilities Discretionary
Grant Program. These programs have been instrumental in ensuring that
needed funds are invested to improve and extend transit services in
both our urban and rural communities.
Second, the Governors strongly urge the Subcommittee to provide at
least $1.8 billion in fiscal year 2004 for intercity passenger rail.
Intercity passenger rail is an vital part of the Nation's
transportation system, particularly in the Northeast and Mid-Atlantic
region, where it provides essential mobility, enhances capacity of
other modes, and provides much needed redundancy to the Nation's
transportation system. This funding level is critically needed to
maintain services and begin a program of essential investments in
equipment and infrastructure to bring the system back to a state of
good repair for reliable service. The United States Department of
Transportation Inspector General has noted that over $1 billion in
capital funds is needed annually just to sustain the current intercity
passenger rail system, regardless of who operates that system. The
states are already major investors in the current intercity passenger
rail system, with the Northeast and Mid-Atlantic states already
investing over $4 billion in intercity passenger rail operations and
infrastructure since 1991. A funding level of $1.8 billion in fiscal
year 2004 will help provide a period of stability for intercity
passenger and commuter rail operations while the Congress,
Administration and states work cooperatively to determine the future of
intercity passenger rail and Amtrak in the Nation's transportation
system.
Third, the Governors urge the Subcommittee to continue funding for
investments in Intelligent Transportation Systems (ITS). It is vital
that the Nation's transportation system maintain and enhance the
capabilities made possible by investments in ITS. The densely populated
Atlantic Coast region relies heavily on ITS to improve operations every
day on both highways and transit. The Northeast's rural areas and
communities also benefit significantly from ITS investments. The
region's ITS systems, including those provided by TRANSCOM and the I-95
Corridor Coalition, have demonstrated their critical role, both in the
emergency management and recovery phases, when security demands put
added pressure on the region's transportation networks.
Fourth, safety on the Nation's highways, transit and rail systems
remains a priority of the Governors. The safety of the aging rail
tunnels along the Northeast Corridor is a particular concern, and we
urge the Subcommittee to fund life safety improvements for the
Baltimore and New York tunnels. The Governors also support maximum
funding for the Railway-Highway Crossing Hazard Elimination Program. As
part of the federal-state partnership to correct hazardous conditions
on the Nation's highways, investments in highway-rail crossings can
reduce injuries and death from accidents even as they allow higher
train speeds and increased reliability.
Fifth, the Governors urge the Subcommittee to provide sufficient
funding for border crossing and gateway infrastructure projects,
particularly those transportation projects that are required to meet
new federal security requirements.
Sixth, the Governors also support the President's funding request
of $20 million for the Surface Transportation Board.
Finally, the Governors support continued federal investment in
transportation research and development programs, particularly the
Federal Railroad's Next Generation High Speed Rail program. This
program enhances safety and helps stimulate the development of new
technologies, which will benefit improved intercity rail service across
the Nation.
The CONEG Governors thank you, Ranking Member Murray and the entire
Subcommittee for the opportunity to share these priorities and
appreciate your consideration of these requests.
______
Prepared statement of the University Corporation for Atmospheric
Research
On behalf of the University Corporation for Atmospheric Research
(UCAR) and the university community involved in weather and climate
research and related education, training and support activities, I
submit this written testimony for the record of the Senate Committee on
Appropriations, Subcommittee on Transportation.
UCAR is a consortium of 66 universities that manages and operates
the National Center for Atmospheric Research (NCAR) and additional
research, education, training, and research applications programs in
the atmospheric and related sciences. The UCAR mission is to support,
enhance, and extend the research and education capabilities of the
university community, nationally and internationally; to understand the
behavior of the atmosphere and related systems and the global
environment; and to foster the transfer of knowledge and technology for
the betterment of life on earth. In addition to its member
universities, UCAR has formal relationships with approximately 100
additional undergraduate and graduate schools including several
historically black and minority-serving institutions, and 40
international universities and laboratories. UCAR is supported by the
National Science Foundation (NSF) and other federal agencies including
the Federal Aviation Administration (FAA).
The fiscal year 2004 budget request for the FAA should support the
Administration's and the country's commitment to a safe, efficient, and
modern aviation system. Weather research contributes to this
commitment. In testimony before the House Committee on Transportation
and Infrastructure last month, Charles Keegan, Associate Administrator
for Research and Acquisitions for the FAA, stated, ``weather continues
to be a major safety factor for all types of aircraft. A recent
estimate by the FAA identified weather as being responsible for 70
percent of flight delays and approximately 40 percent of accidents. To
mitigate the effects of weather, the FAA's Aviation Weather Research
Program conducts applied research in partnership with a broad spectrum
of the weather research and user communities with a goal of
transitioning advanced weather detection technologies into operational
use.'' Leveraging the work of the research community, the FAA has made
tremendous strides in understanding and mitigating severe weather on
aviation. Current research on turbulence, thunderstorm forecasting,
oceanic weather, icing, and other areas will result in even more
savings, in lives and dollars.
Regarding the fiscal year 2004 request for the FAA, I would like to
comment on accounts related to aviation weather research that fund the
collaborative work of researchers in universities and federal
laboratories. These accounts are relatively small in dollar amounts,
but the work is potentially life saving for our Nation's pilots and
passengers.
FACILITIES AND EQUIPMENT
C. Overall Aviation Safety Improvement
1C01 Advanced Technology Development Prototyping
Within Advanced Technology Development Prototyping of the
Facilities and Equipment section of budget, please add $5.5 million to
continue the development and implementation of a terrain-induced
windshear alert system. This project would be done in the Juneau,
Alaska, area because of the complex terrain surrounding the airport.
The technology developed could lead to a National Terrain-Induced
Windshear and Turbulence Alerting System that would be installed in
airports nation-wide to help prevent crashes like the one that occurred
in 1991 on approach to the Colorado Springs Airport. Work would include
verifying the prototype alert system and transferring the technology to
FAA systems developers. I urge the Committee to provide $2.98 billion
for Facilities and Equipment in fiscal year 2004 (the same level as
last year and a 2 percent increase over the President's request), which
will fund a number of worthy programs, including the development and
implementation of a terrain-induced, windshear alert system.
RESEARCH, ENGINEERING AND DEVELOPMENT (RE&D)
Those of us involved in aviation weather research are deeply
concerned about the fiscal year 2004 request for the FAA Research,
Engineering and Development (RE&D) budget. The total request for this
budget is $100 million, $48 million less than the final fiscal year
2003 appropriated amount and almost half the amount appropriated in
fiscal year 2002. The Administration's inadequate budget request will
reduce research in aviation weather by approximately one-third (over 30
percent), and will result in the termination of a number of critical
and potentially life-saving projects. I urge the Committee to fund the
FAA RE&D at $148 million in fiscal year 2004.
A12. Improve Efficiency of Air Traffic Control System
Eliminated from the RE&D line in the fiscal year 2004 budget
request is line A 12. Improve Efficiency of Air Traffic Control System.
While it is true that airline delays are far less frequent due to the
decrease in commercial airline traffic attributable to the economic
slowdown and terrorist activities, the R&D that is now being described
as relevant only to efficiency clearly has as much to do with safety
issues as with delays. Research in the areas of severe convective
weather, visibility hazards, wake turbulence, and oceanic weather would
be eliminated under the current plan. In order to make this
appropriation, I ask that the Committee not transfer funds from line
A11. Improve Aviation Safety (see below). Moving money from one line to
the other will result simply in the same cuts to important aviation
safety R&D work. I urge the Committee to restore line A12 and fund
Weather Research Efficiency, at the very least, at the fiscal year 2003
appropriated level of $12.1 million.
A11. Improve Aviation Safety
Within line A11. Improve Aviation Safety, the Weather Research
Safety program funds many R&D projects including a focus on turbulence.
Over half of all turbulence-related injuries are caused by turbulence
in the vicinity of thunderstorms, leading to $22 million fatalities,
injuries and aircraft damages annually. Current research is focused on
forecasting the location and duration of thunderstorms, work that will
be reduced or terminated if this budget is cut. The request for Weather
Research Safety is down $1 million from the fiscal year 2003 approved
bill. Within line A11, Improve Aviation Safety, I urge the Committee to
provide Weather Research Safety, at the very least, the fiscal year
2003 appropriated level of $21.9 million.
On behalf of UCAR, as well as all U.S. citizens who take to the
skies, I want to thank the Committee for the important work you do for
this country's scientific research, training, and technology transfer.
We understand and appreciate that the Nation is undergoing significant
budget pressures at this time, but a strong nation in the future
depends on the investments we make in Research and Development today.
We appreciate your attention to the recommendations of our community
concerning the fiscal year 2004 FAA budget and we appreciate your
concern for safety within the Nation's aviation systems, particularly
during this extraordinary time in our Nation's history.
______
Prepared Statement of the American Public Transportation Association
APTA is a nonprofit international association of over 1,500 public
and private member organizations including transit systems and commuter
rail operators; planning, design, construction and finance firms;
product and service providers; academic institutions; transit
associations and state departments of transportation. APTA members
serve the public interest by providing safe, efficient and economical
transit services and products. Over 90 percent of persons using public
transportation in the United States and Canada are served by APTA
members.
INTRODUCTION
Mr. Chairman and members of the subcommittee, on behalf of the
American Public Transportation Association (APTA), I thank you for this
opportunity to address the need for federal investment in public
transportation programs under the Transportation, Treasury and
Independent Agencies Appropriations bill for fiscal year 2004.
ABOUT APTA
APTA's 1,500 public and private member organizations serve the
public by providing safe, efficient, and economical public
transportation service, and by working to ensure that those services
and products support national economic, energy, environmental, and
community goals.
APTA member organizations include public transit systems and
commuter railroads; design, construction and finance firms; product and
service providers; academic institutions; and State associations and
departments of transportation. More than 90 percent of the people who
use public transportation in the United States and Canada are served by
APTA member systems.
OVERVIEW
Mr. Chairman, throughout the United States, public transportation
is undergoing a renaissance. Steady increases in transit investment
have dramatically improved and expanded public transportation services,
attracting record numbers of riders on state-of-the-art systems in
metropolitan, small urban and rural areas.
In a recent five-year period alone, public transportation use has
increased by 22 percent--growing faster than vehicle miles and airline
passenger miles traveled over the same period. In 2001, Americans used
public transportation 9.5 billion times--the highest ridership level in
40 years.
Communities across the country are rehabilitating and expanding
public transportation systems and constructing new ones. More than 550
local public transportation operators currently provide services in 319
urbanized areas; 1,260 organizations provide public transportation in
rural areas; and 3,660 organizations provide services to the aging
population and disabled individuals.
Through improved mobility, safety, security, economic opportunity
and environmental quality, public transportation benefits every segment
of American society--individuals, families, businesses, industries and
communities--and supports important national goals and policies.
At the same time, the growing problem of traffic congestion
continues to choke America's roadways and constrain community and
business development. Polls consistently show that most Americans view
congestion as a serious problem that continues to grow every year. In
April of 2003, APTA and the American Automobile Association (AAA)
released the results of a poll that showed 95 percent of Americans said
traffic congestion, including commutes to and from work, has grown
worse over the last three years. The poll also showed 92 percent of
Americans said it was either very important (71 percent) or somewhat
important (21 percent) for their community to have both good roads and
viable alternatives to driving.
FISCAL YEAR 2004 GOALS
Annual Federal appropriations for the Federal transit program have
increased significantly in each of the last 6 years under the
Transportation Equity Act for the 21st Century (TEA-21). Federal
funding increased from just under $4.4 billion in fiscal year 1997 to
$7.2 billion in fiscal year 2003, a 65 percent increase.
The stable and predictable growth in the Federal investment in TEA-
21 led to impressive results for transit. While service was expanded
and improved, and ridership reached its highest level in 40 years,
public demand for additional capital investment, new transit services,
and improvements to existing systems continued to grow. This demand for
additional service and capital projects comes at a time when many
existing assets are nearing the end of their useful lives and need to
be improved or replaced. Indeed, a 2002 American Association of State
Highway and Transportation Officials report estimates that $44 billion
is needed annually to meet current transit capital needs for new
projects and improvements to existing systems.
APTA's recommendations for TEA-21 reauthorization have been made
available to committee members and staff and they contain detailed
funding and programmatic recommendations for the next 6 years. Most
critically, APTA's proposal urges Congress to continue to grow the
Federal investment in public transportation to address critical
national transportation needs, and to fund the Federal transit program
at no less than $8.1 billion in fiscal year 2004.
We recognize that the Fiscal Year 2004 Budget Resolution assumes
$7.3 billion in funding for public transportation in fiscal year 2004.
However, a provision in the resolution granted authority to increase
funding beyond that amount if Mass Transit Account (MTA) revenues
exceed expected levels. Revenues accruing to the MTA could be increased
in a number of ways. These would include providing interest on the
balance of the MTA, particularly if outlays from the account were
scored as they are from the highway account; or if user fees were
adjusted to account for inflation. Therefore, we urge the committee to
make every effort to set transit funding in excess of the level assumed
in the Fiscal Year 2004 Budget Resolution, in order to better address
transit capital investment needs.
FEDERAL INVESTMENT IN PUBLIC TRANSPORTATION
The results of TEA-21 have been profound--more Americans have
access to efficient, safe, and modern transit options than ever before.
Federal investment in public transportation produces tangible assets in
our communities that citizens can see and use. These assets include
light rail lines, buses for commuting, and transit stations that
attract economic development because of convenient access to
transportation options.
Investment in transit makes sense because it is in demand.
Nationwide, many systems are bursting at the seams, with the highest
ridership in 40 years and a huge backlog of capital improvements
identified. In growing communities where transit has not been a
priority in the past, citizens are demanding new services and capital
projects. Public transportation supports a solid and growing economy by
providing access to labor, decreasing time lost to congestion, and
freeing highway and road space for the movement of goods and people.
Public transportation represents an efficient use of scarce financial
resources, because it helps to mitigate congestion in densely populated
areas and provides a mobility option to millions of Americans. Public
transportation represents an environmentally responsible transportation
option because it uses less fuel and emits far less pollution per
passenger than the automobile. A recent report by economists Robert
Shapiro and Kevin Hassett demonstrates that if Americans used public
transportation for only 10 percent of their daily travel needs, the
United States could significantly reduce its dependence on foreign oil.
INCREASED DEMAND
Growing demand nationwide for transit services shows the
effectiveness of federal investment. In a recent 5 year period, transit
ridership grew 22 percent, greater than the growth rate of highways and
domestic air travel during the same time frame. In that same time
period Chicago's MTA system saw ridership increase from 419 million
trips to 450 million; in Dallas, ridership on the DART system rose from
52 million to 60 million; and in LaCrosse, Wisconsin, from 713,000 to
819,000.
Support for increased transit service remains high. In February
2003, Wirthlin Worldwide Public Opinion Poll showed 81 percent of
Americans support the use of public funds for the expansion and
improvement of public transportation; 56 percent say the need to reduce
traffic congestion has become more important over the last 5 years. The
poll also stated 57 percent agree their community needs more public
transportation options, including 64 percent of urban residents, 59
percent of suburban residents, 51 percent of rural residents, and 55
percent of small-town residents.
This poll demonstrates that support for public transportation has
increased dramatically not only in our biggest cities, but in smaller
urban communities and rural areas as well, where 40 percent of
America's rural residents have no access to public transportation, and
another 28 percent have substandard access. It is estimated that rural
America has 30 million non-drivers, including senior citizens, the
disabled and low-income families who need transportation options.
According to a survey of APTA members, bus trips in areas with
populations less than 100,000 increased from 323 million to 426 million
in a recent 5 year span.
Another focus of the support for transit service is in the area of
security. During the September 11th attacks, hundreds of thousands of
citizens in New York and Washington were able to evacuate those cities
quickly and safely because of transit. As long as security threats
endanger our cities, transit serves an invaluable role as a method of
evacuation that will help get people out of harm's way.
ECONOMIC IMPORTANCE
Investment in public transportation plays a key role in stimulating
local economies and the national economy as a whole. Investment in
transit infrastructure creates jobs. Transit-oriented development
around transit stations stimulates construction, new business and
housing which increases land value and property taxes. Transit service
provides employers with access to workers and workers with a way to get
to jobs.
Investment in transit creates jobs and significant economic growth
outside of the communities in which the systems are located. Optima Bus
Corporation (formerly Chance Coach), located in Wichita, Kansas, built
a 125,000 square foot assembly plant in 2000 and doubled its workforce.
Optima builds buses and trolleys to be used in systems around the
country. The same is true for North American Bus Industries in
Anniston, Alabama; Neoplan USA bus company in Lamar, CO; and MCI Buses
in Pembina, ND. These and many other companies supply goods and
services to the transit industry, employ workers and generate economic
activity in their communities with TEA-21 resources.
Public transportation's role in stimulating local economies is
profound. According to a Cambridge Systematics Inc. study, for every
$10 spent on transit capital projects, $30 in business sales is
generated. Every $10 invested in transit operations results in $32 in
business sales. Each $1 billion in federal transportation invested
creates 47,500 jobs. As States and local governments struggle to find
revenues, public transportation has provided a strong return on
investment. In Dallas the taxable value of properties located near its
DART system increased 25 percent faster than elsewhere in the metro
area. In this area, the state of Virginia will reap $2.1 billion in tax
revenues as a result of transit investment over the next 7 years.
Another benefit of public transportation to a healthy economy is
providing job access and reliability for an expanding labor pool. In
cities large and small, businesses and other service providers are
choosing to locate or relocate in areas convenient to public
transportation. Transit systems are working with local businesses to
provide transit passes and tax benefits to both employees and
employers. Transit continues to provide a reliable, convenient option
for employees who wish to avoid crowded highways or who cannot afford
to travel by car.
Indeed, public transportation plays a very specialized role in this
aspect of economic growth and stability. With the help of public
agencies in local communities, transit helps low income workers who
cannot afford other options stay productively employed and off of
welfare. A project in New Jersey provides passes and tickets to welfare
recipients for work-related travel. In Myrtle Beach, South Carolina,
the Pee Dee RTA coordinates with the county department of social
services to run a 24 hour commuter service linking rural residents with
jobs in the city. The Albuquerque transit department provides reduced
rate transit service for low income workers.
Further, savings as a result of transit are significant. Atlanta's
MARTA system saved an estimated $2.2 billion over a 14-year period by
providing motorists a public transportation alternative. A study by the
Texas Transportation Institute concludes that a single year's increase
in automobile traffic requires 27 miles of freeway and 37 miles of
principal streets in each city in America just to keep up. This is
significant when considering urban rail systems can provide more
capacity in a 100 foot right-of-way than a 6 lane freeway, which
requires three times as much space.
ENVIRONMENTAL FACTORS
Public transportation represents an effective way to improve air
quality without imposing new government mandates. According to a report
released last summer by economists Dr. Robert Shapiro of the Brookings
Institution and Dr. Kevin Hassett of the American Enterprise Institute,
public transportation generates 95 percent less carbon monoxide, 92
percent less volatile organic compounds, and about half as much carbon
dioxide and other pollutants per passenger mile than individuals in
private automobiles. The study also shows that public transportation
already saves more than 855 million gallons of gasoline and 45 million
barrels of oil a year. This is equivalent to the energy used to heat,
cool, and operate one quarter of all American homes annually, or half
the energy used to manufacture every computer and piece of electronic
equipment in America every year.
The study also found that if one in ten Americans used public
transportation regularly, U.S. reliance on foreign oil could be cut by
more than 40 percent. This is nearly equivalent to the amount of oil
imported from Saudi Arabia annually. It reported that even small
increases in transit use would help most of the 16 major cities that
currently fail to meet EPA standards for carbon monoxide emissions; and
that transit is twice as fuel efficient as private vehicles for each
passenger mile traveled.
PRESIDENT'S BUDGET PROPOSAL
In February, the President's fiscal year 2004 budget proposal was
released. It calls for a 6 percent increase in funding for the
Department of Transportation, but no increase in overall investment for
public transportation. Prior to unveiling his budget, the President
identified his priorities for the Nation in the annual State of the
Union Address. These included revitalizing the Nation's economy,
reducing dependence on foreign sources of energy, helping the
environment by investing in hydrogen powered vehicles and applying the
compassion of America to solve disadvantaged American's problems.
Public transportation assists in reaching each of these goals.
Regarding the economy, 47,500 jobs are created by every $1 billion
invested in the public transportation infrastructure. $30 million in
private business sales are generated for every $10 million invested in
transit. Transit provides efficient access to labor and mitigates
congestion so that goods may travel more freely.
With regard to reducing dependence on foreign sources of energy,
public transportation reduces by millions of barrels the amount of oil
that would otherwise be imported every year. In terms of the
environment, public transportation produces less pollution per rider
than the automobile. It reduces the amount of volatile organic
compounds and nitrogen oxides that contribute to smog and illnesses
related to polluted air such as asthma.
Public transportation is a compassionate way to address the
mobility needs of millions of Americans. It provides transportation
options to the disabled and those who are unable to drive. It provides
an inexpensive way for lower-income workers to commute to work,
allowing them to save money for their families that would otherwise be
spent on driving expenses. It provides a safe way for the elderly to
visit the doctor or go to the grocery store.
APTA questions the Administration's proposal to restructure a
Federal transit program that has worked so well in recent years. APTA's
recommendations for the reauthorization of the Federal transit program
build on the success of the current program without eliminating any of
the major elements of that program. We do not believe that bus
replacement and facility needs can be addressed by folding the
discretionary bus program into the formula and fixed guideway programs.
We support retention of a distinct fixed guideway modernization program
that helps improve the efficiency of systems that often operate at
capacity and serve large numbers of citizens in communities that depend
on public transportation.
Further, APTA opposes the Administration's proposal to reduce the
Federal share of new fixed guideway transit projects from 80 percent to
50 percent because we believe it would bias decisions on transportation
investments that are made at the local level. APTA believes that such
decisions should be based on project merit and local transportation
needs, and not on the basis of the Federal share of transportation
project costs. Communities that want to build rail and other fixed
guideway projects already make a substantial commitment of local
resources for project construction under existing law. Further, to
receive Federal funding for such projects, the community must
demonstrate to the Federal Transit Administration that it has the local
resources to operate and maintain the system once it is built. The full
funding grant agreement (FFGA) process protects against the funding of
projects that fail to provide good benefits to the community or do not
have adequate local funding for long-term operations. Good rail and
other fixed guideway systems can provide enormous benefits to a
community, including a wide array of economic benefits, and they should
be considered with other transportation investments in the local
transportation planning process on a level playing field.
We strongly believe that growth of the Federal investment in public
transportation can help advance many of the Nation's goals, and that
freezing Federal funding for transit will erode purchasing power and
increase the backlog of unmet transit capital needs. We urge the
committee to fund the Federal transit program in fiscal year 2004 at no
less than $8.1 billion.
CONCLUSION
Public transportation can play a key role in meeting the goals of
the Administration and Congress in providing economic development,
energy dependence, transportation options for Americans who cannot
afford to drive or are not able to, and preserving the environment. To
do so it requires a commitment on the part of the Federal government in
the form of increased predictable investment.
Mr. Chairman, we look forward to working with the Committee as it
advances legislation to invest in national transportation
infrastructure needs.
______
Prepared Statement of the California Industry and Government Central
California Ozone Study (CCOS) Coalition
Mr. Chairman and Members of the Subcommittee: On behalf of the
California Industry and Government Central California Ozone Study
(CCOS) Coalition, we are pleased to submit this statement for the
record in support of our fiscal year 2004 funding request of $500,000
from the Department of Transportation (DOT) for CCOS as part of a
Federal match for the $9.1 million already contributed by California
State and local agencies and the private sector.
Most of central California does not attain federal health-based
standards for ozone and particulate matter. The San Joaquin Valley is
developing new State Implementation Plans (SIPs) for the federal ozone
and particulate matter standards in the 2002 to 2004 timeframe. The San
Francisco Bay Area has committed to update their ozone SIP in 2004
based on new technical data. In addition, none of these areas attain
the new federal 8-hour ozone standard. SIPs for the 8-hour standard
will be due in the 2007 timeframe--and must include an evaluation of
the impact of transported air pollution on downwind areas such as the
Mountain Counties. Photochemical air quality modeling will be necessary
to prepare SIPs that are approvable by the U.S. Environmental
Protection Agency.
The Central California Ozone Study (CCOS) is designed to enable
central California to meet Clean Air Act requirements for ozone State
Implementation Plans (SIPs) as well as advance fundamental science for
use nationwide. The CCOS field measurement program was conducted during
the summer of 2000 in conjunction with the California Regional
PM10/PM2.5 Air Quality Study (CRPAQS), a major
study of the origin, nature, and extent of excessive levels of fine
particles in central California. CCOS includes an ozone field study, a
deposition study, data analysis, modeling performance evaluations, and
a retrospective look at previous SIP modeling. The CCOS study area
extends over central and most of northern California. The goal of the
CCOS is to better understand the nature of the ozone problem across the
region, providing a strong scientific foundation for preparing the next
round of State and Federal attainment plans. The study includes six
main components:
--Developed the design of the field study,
--Conducted an intensive field monitoring study from June 1 to
September 30, 2000,
--Developing an emission inventory to support modeling,
--Developing and evaluating a photochemical model for the region,
--Designing and conducting a deposition field study, and
--Evaluating emission control strategies for upcoming ozone
attainment plans.
The CCOS is directed by Policy and Technical Committees consisting
of representatives from Federal, State and local governments, as well
as private industry. These committees, which managed the San Joaquin
Valley Ozone Study and are currently managing the California Regional
Particulate Air Quality Study, are landmark examples of collaborative
environmental management. The proven methods and established teamwork
provide a solid foundation for CCOS. The sponsors of CCOS, representing
state, local government and industry, have contributed approximately
$9.1 million for the field study. The Federal government has
contributed $3,730,000 to support some data analysis and modeling. In
addition, CCOS sponsors are providing $2 million of in-kind support.
The Policy Committee is seeking Federal co-funding of an additional
$6.25 million to complete the remaining data analysis and modeling and
for a future deposition study. California is an ideal natural
laboratory for studies that address these issues, given the scale and
diversity of the various ground surfaces in the region (crops,
woodlands, forests, urban and suburban areas).
There is a national need to address national data gaps and
California should not bear the entire cost of addressing these gaps.
National data gaps include issues relating to the integration of
particulate matter and ozone control strategies. The CCOS field study
took place concurrently with the California Regional Particulate Matter
Study--previously jointly funded through Federal, State, local and
private sector funds. Thus, the CCOS was timed to enable leveraging the
efforts of the particulate matter study. Some equipment and personnel
served dual functions to reduce the net cost. From a technical
standpoint, carrying out both studies concurrently was a unique
opportunity to address the integration of particulate matter and ozone
control efforts. CCOS was also cost-effective since it builds on other
successful efforts including the 1990 San Joaquin Valley Ozone Study.
Federal assistance is needed to effectively address these issues.
For fiscal year 2004, our Coalition is seeking funding of $500,000
from DOT through highway research funds. DOT is a key stakeholder
because Federal law requires that transportation plans be in conformity
with SIPs. The motor vehicle emission budgets established in SIPs must
be met and be consistent with the emissions in transportation plans.
Billions of dollars in Federal transportation funds are at risk if
conformity is not demonstrated for new transportation plans. As a
result, transportation and air agencies must be collaborative partners
on SIPs and transportation plans. SIPs and transportation plans are
linked because motor vehicle emissions are a dominant element of SIPs
in California as well as nationwide. Determining the emission and air
quality impacts of motor vehicles is a major part of the CCOS effort.
In addition, the deposition of motor vehicle emissions and the
resulting ozone is a nationwide issue.
Thank you very much for your consideration of our request.
______
Prepared Statement of the American Passenger Rail Coalition
Chairman Shelby and Members of the Subcommittee on Transportation,
Treasury and General Government, thank you for the opportunity to
present testimony on fiscal year 2004 appropriations for Amtrak and for
rail safety, research and development programs under the Federal
Railroad Administration (FRA). My name is Harriet Parcells and I am the
Executive Director of the American Passenger Rail Coalition (APRC), a
national association of railroad equipment suppliers and rail
businesses.
The American Passenger Rail Coalition (APRC) urges the Subcommittee
to appropriate $1.812 billion for Amtrak in fiscal year 2004. This is
the level of funding Amtrak has stated is needed to operate the
existing national passenger rail system and to make crucial capital
investments. Under the leadership of Amtrak President David Gunn and
the Amtrak Board of Directors, Amtrak has been taking critical actions
to stabilize and improve the national passenger rail network, reduce
operating costs and bring a new candor and openness to Amtrak's
accounting and operations. A strong Federal appropriation in fiscal
year 2004 is essential to Amtrak's ability to continue these successful
actions and bring the national passenger rail system into a good state
of repair.
A modern, reliable and efficient national passenger rail system is
in the mobility, economic and national security interests of the
country. In busy metropolitan corridors, intercity passenger rail
offers a safe, cost-effective alternative to congested highways and
airports. For citizens of rural communities, Amtrak trains provide
dependable and affordable mobility that is frequently the only
convenient, all-weather intercity public transportation available.
Government investments in intercity passenger rail enhance national
security as was demonstrated in the days and weeks following the
terrorist attacks of September 11, 2001. Investments in rail also yield
significant economic and environmental benefits for cities, States and
the Nation. Public opinion polls consistently show that Americans
across all regions of the country, income and education levels,
strongly support Federal government investment in the national Amtrak
system.
AMTRAK TRAINS ARE AN ATTRACTIVE TRAVEL CHOICE FOR MANY
Ridership on Amtrak trains rose steadily for 5 years, from fiscal
year 1997-fiscal year 2001, and reached 23.5 million riders in fiscal
year 2001. Over the past 18 months, a weak economy, security concerns
by the public since the September 11th attacks and the war in Iraq and
other factors, have adversely impacted travel on air, rail and other
modes and the travel sector of the economy overall. The fact that
Amtrak ridership dipped only slightly in fiscal year 2002 from the
prior year's ridership is a good indication of the public's support and
comfort with travel by rail. In the first 5 months of fiscal year 2003
(October 2002-February 2003), travelers have continued to select rail
travel for many trips. Amtrak ridership has dipped 1.5 percent
nationwide compared to fiscal year 2002. In the West, Amtrak ridership
has increased 4.3 percent compared to one year ago, with western
corridor trains showing strong gains of 8 percent. California's strong
commitment to and investments in improved passenger rail service over
many years are paying off as growing numbers of people leave their cars
behind and take the train to their destination. Ridership on Amtrak's
Surfliner service that operates between San Diego and Los Angeles is up
21 percent in the first 5 months of fiscal year 2003, compared to one
year ago. Ridership on the state's Capitol Corridor and San Joaquin
trains is also up, 8 percent and 5.5 percent, respectively. In March
2003, total Amtrak ridership was up 2.3 percent over March 2002.
Ridership gains have been helped by some travel promotions Amtrak has
run--as have the airlines--to attract travelers who are feeling the
pinch of a weaker economy and anxieties about the possibility of future
terrorist acts. Thus, Amtrak passenger revenues for the first 5 months
of fiscal year 2003 are 12 percent below revenues one year earlier.
AMTRAK'S NEW LEADERSHIP FOCUSED ON STABILIZING THE RAIL NETWORK
Amtrak President David Gunn and the Amtrak Board of Directors have
been taking actions over the past year to stabilize Amtrak's finances,
bring the passenger railroad into a good state of repair, reduce
operating costs and bring greater transparency to Amtrak's finances.
Under Mr. Gunn's leadership, Amtrak's management structure has been
streamlined to reduce costs and be more efficient. Amtrak has largely
exited the express freight business, which was losing money rather than
generating revenues for the railroad. Amtrak has embarked upon a
program to repair wrecked rolling stock that has been out of service.
Nearly 10 percent of Amtrak's equipment was in need of wreck repair
last year. As of the end of April 2003, 22 railcars will have been
repaired to go back into service on routes around the country.
CAPITAL FUNDING NEEDED TO ADDRESS CRITICAL INVESTMENT
Insufficient capital funding and Amtrak's focus in recent years on
achieving operating self-sufficiency, as mandated by Congress, resulted
in deferral of investment in important capital projects. Amtrak's
fiscal year 2004 request of $1.812 billion includes $1.04 billion to
address critical capital needs. These needs include infrastructure
investments on the Northeast Corridor that are crucial to operation of
the high-speed Acela Express service and investments to continue to
repair and return to service rolling stock that has been sidelined. The
remaining $768 million is needed for operation of the national Amtrak
system. Amtrak is pursuing a sound course and APRC urges Congress to
provide this critical funding to enable Amtrak to make needed
investments in the year ahead.
FEDERAL INVESTMENTS IN TRANSPORTATION SUPPORT ECONOMIC DEVELOPMENT
Federal investments in transportation infrastructure are vital to
the economic productivity of states and the nation. Every billion
dollars invested in transportation infrastructure projects generates
approximately 42,000 jobs. These investments ripple through the
economy, amplifying the economic benefits of the investment.
Investments in intercity passenger rail will create new jobs, spur
economic development and enhance the economic competitiveness of
regions that invest in improved passenger rail service.
The U.S. government has underinvested in passenger rail for years.
The U.S. government invests only 1 percent of total transportation
spending on intercity passenger rail each year. Other industrialized
nations, with whom the United States competes in the global market, by
contrast, invest over 20 percent of total transportation capital
spending in rail. It is time to reverse this pattern of
underinvestment. The returns to the Nation will be substantial.
RAIL BENEFITS RURAL AMERICA AS WELL AS METROPOLITAN CORRIDORS
The need for intercity passenger rail service in congested
metropolitan corridors is clear to most policy makers. What appears to
be less appreciated is the value intercity passenger rail service
provides to small cities and communities across the country. Yet,
intercity passenger rail service is vital to the economic health of
hundreds of America's small cities and rural communities and the
mobility of their citizens. Airlines have reduced or abandoned air
service to many small cities, making the role of intercity passenger
rail even more important to the mobility of citizens in these
communities. Residents of Tuscaloosa and Anniston, AL, of Marshall and
Gainesville, Texas, of Rugby, Minot and Devils Lake, ND and hundreds of
other communities from coast to coast value and depend upon the
passenger trains that connect their communities to the rest of the
Nation.
RAIL CONTRIBUTES TO OTHER NATIONAL GOALS
Travel by passenger trains is energy-efficient, consuming about 38
percent less energy (BTU's) per passenger-mile than travel by
commercial airline. Transportation is the only sector of the U.S.
economy that consumes more oil today than it did 20 years ago. U.S.
dependence on imported oil has been rising and since 1997, exceeds 50
percent of our daily petroleum use. Last year, the United States spent
$90 billion for imported oil. Investments in improved passenger rail
service are a sensible way to reduce the vulnerability created by the
nation's heavy and costly dependence on imported oil. Lower energy
consumption translates into benefits to air quality. Investments in
passenger rail help reduce harmful air pollutants and contribute to
state and community efforts to achieve healthy air quality.
In conclusion, APRC urges the Subcommittee to fully fund Amtrak's
request for $1.812 billion in fiscal year 2004 to enable Amtrak to
continue down the path it is pursuing to improve the reliability and
quality of passenger rail service nationwide. APRC also supports strong
funding of rail safety and research and development programs under the
Federal Railroad Administration.
Thank you Chairman Shelby and Members of the Subcommittee for the
opportunity to provide this testimony on behalf of our rail business
association.
______
Prepared Statement of the Railway Supply Institute, Inc.
On behalf of the Railway Supply Institute (RSI), I offer the
following comments on Amtrak's fiscal year 2004 appropriation request.
RSI is a trade association that represents the domestic railway
supply industry. Our members provide goods and services to the Nation's
freight and passenger railroads as well as to rail rapid transit
systems. We are a $20 billion a year industry employing some 150,000
people nationwide.
RSI supports Amtrak's request of $1.8 billion for fiscal year 2004
to operate the current nationwide route structure and begin the process
of stabilizing our nation's intercity railroad passenger system. In
addition to allowing Amtrak to continue to operate its network of
intercity passenger trains, that amount will allow the railroad to
begin the task of rebuilding wrecked equipment so it can be put back
into revenue service as well as beginning the process of rebuilding the
Northeast Corridor infrastructure. RSI members will provide a
significant portion of material needs for the capital projects outlined
in the Amtrak request. This will provide a much-needed boost to an
industry that has suffered through the recent economic downturn.
As the Department of Transportation's Inspector General has stated
time and again, the real problem with Amtrak is not management
efficiency or the cost of the route system but the burden of funding
its infrastructure. Until Congress develops a way to address these
infrastructure costs, cutting trains or attempting to extract
management efficiencies will not achieve the desired results. RSI
believes David Gunn has demonstrated the ability to manage Amtrak
effectively. He has eliminated waste, reduced management levels, cut
costs, brought fiscal responsibility to the railroad and improved
Amtrak's credibility.
Amtrak's workable five-year capital investment plan is what Amtrak
needs to become a good, solid, reliable passenger railroad. The
railroad's strategic plan will bring Amtrak's capital assets up to a
state of ``good repair'' and maintain current rail operations. To
support the strategic plan, Amtrak proposes, and RSI supports, that
annual federal funding range from $1.8 million in fiscal year 2004 to
under $1.5 billion in fiscal year 2008 for the combined capital
investment and operating needs.
RSI does recognize the constraints of the appropriations process.
In response to this, we have developed a proposal that would create a
Rail Finance and Development Corporation (RFDC). RFDC is designed, in
part, to supplement federal appropriations for Amtrak by supporting the
significant infrastructure costs that Amtrak must address in the
Northeast Corridor and other parts of the system. This supplemental
funding source could significantly reduce the burden of the
Appropriations Committee and allow it to use its limited resources to
maintain basic service levels for rail passenger service. RFDC would be
a private, non-profit, federally chartered corporation similar to
Fannie Mae, that would issue up to $50 billion in tax-credit bonds over
a six-year period for rail related infrastructure investments. Eligible
investments would include higher speed intercity rail; rail access to
ports intermodal terminals and airports; increased freight rail
capacity; short line infrastructure needs; and rail line relocation. We
have enclosed a white paper describing the RFDC proposal and I ask that
this statement and the White Paper be included in the record.
Until RFDC, or some other supplemental funding mechanism, becomes
policy, we urge the Senate Transportation Appropriations Subcommittee
to provide the resources Amtrak needs to survive.
RSI looks forward to working with the Senate to create a long-term
stable source of funding for Amtrak and our nations freight railroad
system.
______
Prepared Statement of the Air Traffic Control Association, Inc.
The Air Traffic Control Association, Inc. (``ATCA''), located in
Arlington, Virginia, USA is a professional association of forty-seven
years' standing dedicated to advancement in the science and profession
of air traffic control and aviation safety. Its membership is worldwide
in scope, and represents all aspects of the air traffic control
discipline, from air traffic control specialists and airway facilities
technicians who operate and maintain the air traffic control system, to
those individuals and companies who develop, manufacture and provide
the technology, equipment, and services which support the system, to
the citizens, government agencies, and airlines who use the system.
INTRODUCTION: THE CHANGED AVIATION MARKETPLACE
Immediately after September 11, 2001, most aviation experts
predicted that the market effects of the terrorist attacks on air
transportation would be short lived, and that conditions prevailing
before those events--economic prosperity, increasing demand, congestion
and delay--would recur within 18 months or so. Although temporary
depression in air transportation demand was anticipated, the aviation
community admittedly did not foresee the lingering, intensifying
economic doldrums, global political instability and war to come.
Certainly few, if any prognosticators envisioned air traffic would be
so persistently and profoundly depressed that major airlines and
related aviation enterprises would today be struggling for their very
existence.
Now, with the war against terrorism continuing and military action
in Iraq just winding down, and health concerns heightened, the aviation
community is becoming reconciled to the reality that sluggish air
transportation market conditions likely will prevail for some time.
Airlines, airports and policy makers are adjusting perspectives, plans,
programs, and expectations to suit new financial and operational
realities.
First among these realities is the stressed, and in some cases
desperate financial condition of commercial aviation. Income is down
across the board. Fewer passengers are traveling at lower fares,
meaning less ticket revenue for airlines and concession income for
airports. Fewer flights and smaller capacity aircraft mean reduced tax
and user fee income for government and private air traffic service
providers. And with airlines, airports and air traffic service
providers in difficulty, aviation suppliers including travel agents,
aircraft manufacturers, aviation technology companies and airport
construction firms are also suffering.
To make matters worse, aviation costs have not diminished
proportionately, but rather have remained constant or, like fuel
prices, have increased. Airlines, air traffic service providers, and
airports still must make payments on aircraft and other capital
equipment, pay rent, employee wages and benefits, and meet other
contractual obligations. Moreover, as a result of the terrorist
attacks, airlines, airports, air traffic service providers, and
government organizations must absorb significant additional costs of
intensified and additional security measures. Since September 11, 2001,
the airline industry alone reports having suffered a loss of $18
billion; they expect 2003 losses to exceed $10 billion.
Consequently, virtually all aircraft operators are economizing in
every way possible, reducing or rationalizing services, deferring
capital expenditures, renegotiating labor agreements, freezing hiring,
laying off workers, and selling or mothballing aircraft. Many
organizations, including major airlines, are regrouping, reforming,
reorganizing, realigning, or disappearing entirely through merger or
bankruptcy. Airlines are adjusting schedules, equipage, and even route
structures in an effort to match service to demand. Some carriers are
switching to smaller capacity aircraft and maintaining or increasing
frequency. Others are abandoning hubs in favor of more point-to-point
service. Many high-end and business travelers are abandoning commercial
service altogether, instead electing to use corporate and fractional
ownership aircraft or substituting telecommunications alternatives to
travel.
Air traffic service providers are doing all they can to economize
in their own operations while continuing to provide equal or better
service, and making system enhancements that will improve operating
safety and efficiency. But after years of belt tightening and resource
deprivation, there is precious little room in most air traffic service
organizations for significant additional efficiencies. A significant
point to recognize is that even though the benefits of ATM system and
interfacing aircraft enhancements will outweigh the costs in the long
run, they do not come for free, and there simply is precious little
cash available--either in ATS provider or aircraft operator coffers--to
invest today.
There is another aspect of the U.S. air transportation system that
current events should amplify--that the U.S. National Airspace System,
in contrast to many other national systems, is a ``common'' civil-
military system. Its infrastructure and air traffic controllers support
our National Defense and Homeland Security aircraft as well. This is
but another reason that the ATM system must be sustained and upgraded
to meet the challenge of a new era.
AVIATION SAFETY AND SECURITY IS A FEDERAL RESPONSIBILITY
Aviation--a critical segment of the Nation's GNP and, even more
important, enabler of U.S. tourism, commerce and industry--clearly is
on the ropes. Now is not the time to retrench and watch the Nation's
air transportation system--jewel of U.S. ingenuity and free
enterprise--disintegrate. Rather, the Federal government must do all it
can to preserve and strengthen U.S. aviation, especially in these
difficult times. To that end, the Air Traffic Control Association urges
the following.
First, it was necessary and appropriate for the Federal Government
to provide financial relief to the Nation's airlines, to help them
weather the aftermaths of the 9/11 attacks and market impacts of the
War on Terrorism and military action in Afghanistan and Iraq. Although
aviation was the vehicle, the 9/11 attacks were directed against the
United States as a whole. Protecting the Nation against future
terrorism is the Federal Government's responsibility, and the costs--be
they for National Defense or Homeland Security purposes--should be
borne by all Americans. Nevertheless, airline passengers, aircraft
operators, and airports are shouldering the lion's share of the costs
of air transportation system security--from direct fees for security,
to aircraft and terminal modifications, to Airport and Airway Trust
Fund expenditures for security infrastructure improvements. And this at
a time when the entire aviation community is suffering
disproportionately compared with other segments of the economy from the
negative market and financial consequences of public fear and wartime
disruptions to travel and tourism.
Because airport and airline security is an ongoing National and
Homeland Defense function, security fees should be discontinued
permanently, and the costs of TSA screening activities, related
equipment and construction instead paid for with appropriations derived
from the general fund. To use trust fund dollars for this purpose
unfairly assesses passengers and shippers for the costs of safety and
security measures that benefit everyone. Protecting aircraft from
hostile attack and takeover such as we experienced in 2001 benefits the
aircraft operator, the passengers and crew and, no less importantly,
people and property on the ground that could be impacted. Moreover,
using the trust fund in this way mortgages U.S. aviation's future by
depleting the fund without corresponding replenishment. The Association
looks forward to the announced plan of the Transportation Security
Administration to establish a program whereby TSA would issue Letters
of Intent (LOI) to reimburse 75 percent-90 percent of the costs of
federally mandated security upgrades, to be paid with appropriated
funds.
FAA OPERATIONS APPROPRIATION SHOULD BE ``RE-BASELINED''
The Federal Government must rededicate itself to the mission of
modernizing and improving airport and airway infrastructure and
technology. Modernization will enable air carriers and other aircraft
operators to operate efficiently as well as safely and securely during
these difficult times, sustain the National Defense and Homeland
Security mission, and prepare a robust, capable air transportation
system for the future.
The Administration is demonstrating its commitment to U.S. aviation
by proposing to continue the FAA funding profile established by the
Wendell H. Ford Aviation Investment and Reform Act for the 21st Century
(AIR-21). That landmark legislation boosted Federal spending limits for
air transportation infrastructure improvement, and established
budgetary mechanisms to assure that appropriations matched authorized
levels. The Administration is seeking $7.5 billion per year in fiscal
year 2004 for FAA Operations, increasing over the authorization period
at least at the rate of inflation. For FAA Facilities and Equipment,
the Administration proposes $2.9 billion in fiscal year 2004, gradually
increasing to $3.1 billion in fiscal year 2007. And the Administration
proposes to continue the current funding level of $3.4 billion per year
for Airport Grants. $100 million per year would be available for FAA
Research, Engineering and Development. The Association believes that
this request understates the real needs of the FAA. Although it
represents the Administration's judgment of the proper apportionment of
financial resources, we believe it does so at the sacrifice of
activities and programs that should not be further deferred.
The Air Traffic Control Association agrees with the Administration
that continued robust funding for air transportation operations and
National Airspace System improvements is a national imperative. Public
reliance on air transportation is strong and increasing, and recent
history shows that the occasional market dips coincident with military
action or economic recession tend to be temporary. When conditions
improve, the air transport market recovers rapidly. Immediately prior
to the 9/11 terrorist attacks, aviation was experiencing unprecedented
growth, with overcrowding and congestion clogging many major
facilities. Current projections are that aviation markets will recover
to pre-9/11 conditions--including congestion and delay--sometime in
2005-2006. Even with a brief hiatus in demand, the aviation community
will be hard pressed to progress sufficiently on needed capacity
improvements in time to avoid a repeat of the near gridlock conditions
prevailing during the summer of 2001. Now is not the time to hesitate
about moving on with modernization.
For the following reasons, therefore, the Air Traffic Control
Association urges the Congress to take a more proactive approach to
funding operations and modernization of the National Airspace System
than the Administration proposes. First, the Administration's fiscal
year 2004 funding proposal (3.2 percent increase, less than the rate of
inflation) understates the real resource requirements of FAA's
Operations functions. FAA's air traffic services, airway maintenance,
and regulation and certifications organizations already are debilitated
by years of funding deprivation. Because 95 percent of FAA's Operations
budget is dedicated to personnel and related costs, years of rate-of-
inflation increases have barely covered the costs of mandatory pay
increases for on-board staff and plant maintenance and have not
addressed the backfill overtime costs associated with training
controllers to deal with new situations and systems. Almost no money
has been available for projects and activities necessary to prepare for
future needs. FAA has barely begun the process of hiring and training
significant numbers of air traffic controller and airway facilities
technician candidates to replace the ``bubble'' of employees eligible
and expected to retire. (The Administration is requesting $14 million
to hire 300 controller candidates in fiscal year 2004, but because
training a controller takes years and many ``wash out'' of the process,
there are some who estimate that 1,000 per year is a more realistic
hiring goal.) Schedules for installation, check out, and training of
workers on new equipment and technologies are stretching out, delaying
benefits until the new items can be put into service. Less than maximum
effort can be devoted to development and certification of new
technologies. Efforts to devise capacity, efficiency, and safety
enhancing air traffic procedures and operating techniques are under
resourced. And these chronic shortages are being exacerbated by
diversion of resources to satisfy post-9/11 security activities and
requirements. Before FAA can begin to survive on rate-of-inflation
increases in its operations and maintenance funding the financial base
on which these increases are calculated must be increased
substantially. ATCA therefore urges Congress to authorize and
appropriate Operations funding in fiscal year 2004 at least 15 percent
over and above the Administration's $7.5 billion estimate, or $9
billion.
PROTECT AIR TRAFFIC SYSTEM MODERNIZATION!
The Administration's $2.9 billion per year request for FAA
Facilities and Equipment authorization and appropriation falls far
short of what is required to sustain a really robust modernization and
improvement effort. This amount is $100 million less than the amount
enacted in fiscal year 2002, and 2 percent less than the fiscal year
2003 requested amount. But needs for F&E dollars have increased
significantly in since then. FAA must first of all sustain existing
capability, which is becoming ever more costly. Although much has been
replaced, a significant portion of equipment and software in use today
is operating well beyond its intended service life and is therefore
increasingly trouble prone and costly to repair or replace. Moreover,
in the aftermath of 9/11, significantly more of this legacy equipment
will remain in service and must be maintained indefinitely, for
example, primary radars and geographically dispersed navigation aids
and communications systems have renewed value and need to be retained.
Other items, many intended to meet joint security and defense needs of
FAA, DOD, and Homeland Defense, are being added to FAA's shopping cart.
And F&E dollars also pay for the modernization of the Nation's air
traffic control system. Most of these projects are well underway,
requiring large capital outlays. Disruptions due to budget adjustments
are very costly, both in terms of money and foregone operating
benefits. And the F&E account also supports implementation of FAA's
Operational Evolution Plan (OEP), a 10 year rolling blueprint for
applying advanced technologies and other improvements to garner near
term safety, capacity and efficiency benefits. The most recent
iteration of the OEP covering fiscal years 2004-2013 is estimated to
cost $12.4 billion over the ten years--up $1 billion over the fiscal
years 2001-2010 version.
In 1998, the FAA estimated that modernization costs alone reflected
in Version 3.0 of the NAS Architecture would be approximately $3
billion per year. Add to this the annual costs of sustaining and
refurbishing equipment in use--much of which is now permanently off the
decommissioning list, new National Defense and Homeland Security
requirements, and the expanding price of the OEP, and it becomes clear
that the real necessary level of FAA funding for F&E in fiscal year
2004 and the foreseeable future is more in the order of $4 billion per
year. This is the amount the Association urges Congress to authorize
and appropriate.
In addition, the Association urges the Administration and Congress
to assure that dollars appropriated for NAS improvements are not
diverted to other purposes. To be specific, because NAS improvement
projects are multi-year endeavors requiring multi-year budgeting and
financial management, annual rescission of unexpended funds wreaks
havoc with overall planning. Often, the ``unexpended funds'' are
associated with worthwhile projects and activities already in motion,
and do not represent overlooked or obsolete requirements. It would be
helpful if this practice were avoided. Or, alternatively, Congress
might consider instituting a mechanism that increases the bottom line
appropriation that compensates for earmarks rather than, as presently
occurs, broader based activities or programs being decreased. Second,
FAA prioritizes projects and activities with the objective of achieving
the best result for the entire air transportation system. Although
legislators understandably are concerned about aviation issues in their
home districts, resisting the temptation to earmark F&E funds for
specific local projects would greatly benefit the entire system. Third,
other aviation priorities such as the Essential Air Service Program
should be funded through the regular budget process, not through
diversion of FAA F&E dollars intended for NAS modernization. Each year
hundreds of millions of FAA F&E dollars redirected through these budget
procedures--dollars that otherwise would have been applied to improving
the safety, capacity and efficiency of the NAS.
THE PROBLEM OF ASYNCHRONOUS IMPROVEMENTS
The promise of air traffic system modernization will not be
realized, regardless of the sufficiency of funding, without
corresponding upgrade of aircraft technologies that interface with the
ATC system. At a recent Air Traffic Control Association symposium, one
speaker estimated that the cost of equipping each commercial aircraft
to take advantage of new ATC technologies and procedures is
approximately $465,000. Avionics for business and general aviation
aircraft are correspondingly expensive. Much of this equipage expense
will be offset by the value to the aircraft operator of efficiencies
and flexibility derived from the new systems (e.g. fuel and time
savings from more direct routings, less holding, reduced delays, more
operationally efficient altitudes.) FAA as the air traffic service
provider also will derive safety, efficiency and capacity benefits from
implementation of modern systems, for example reduced separation
between aircraft thereby increasing airspace capacity, or preventing
collisions and improving traffic flow on the airport surface.
But no one will enjoy the maximum payback from modernization unless
ATC improvements and aircraft upgrades take place contemporaneously,
and all aircraft in given airspace are comparably equipped. If new ATC
system implementation lags behind aircraft equipage, operators will
have made an investment with no immediate payback. If the ATC system is
equipped without corresponding aircraft capability, neither the users
nor FAA will derive full benefits. And if ATC improvements are made but
only some aircraft are equipped for the new environment, airspace must
be segregated to allow those who are equipped to derive benefits while
still permitting those not so capable to continue operating and the
underlying infrastructure must support both.
Universal aircraft equipage can be achieved in three ways. First,
aircraft operators may be encouraged to equip voluntarily if the
operating benefits are sufficient to outweigh the cost. Second,
disincentives may be imposed on operators that fail to equip. For
example, they may be foreclosed entirely from some environments,
subjected to less optimal operating conditions (e.g. sub-optimal
routings, non-preferred altitude), or charged higher fees or taxes. A
third alternative is for the Government to mandate minimum equipage for
everyone.
The first option--voluntary compliance--benefits everyone. But
there are situations in which the cost/benefit ratio of a given
improvement is positive for the entire system, yet negative for a
specific aircraft or fleet. In that case, a rational operator may well
choose not to invest. And cash poor operators--and today many of the
Nation's largest air carriers are in this category--may simply be
unable to invest in improved aircraft systems regardless of the
potential compensating benefits. Using the second option--operating
restrictions--to coerce compliance is not a good choice because such
mechanisms work by degrading the operating environment for those less
advantaged, increasing their costs and as a result perpetuating the
disparity. Moreover, selective restrictions tend to disadvantage those
who are least able to afford it, e.g. smaller commercial operators
providing service to remote and underserved localities, and general
aviation.
The third option, Government mandate, is the only 100 percent
effective approach. But in the current economic environment, with the
equivalent of one-third the U.S. commercial airline fleet in mothballs
and one quarter of commercial airline capacity operating in bankruptcy,
a mandate to equip with expensive new avionics could precipitate or
accelerate liquidation of major aviation companies. For reasons stated
previously in connection with aid to financially distressed airlines,
the Air Traffic Control Association urges the Administration and
Congress to consider making updated aircraft avionics an integral part
of federally funded NAS modernization projects. This approach assures
that necessary technologies will reliably be deployed congruent with
corresponding new FAA systems. And in this way, safety and operating
efficiency of the National air transportation system will be maximized
without risking widespread collapse of the aviation industry. We also
would ask that Members of transportation authorizing and appropriations
committees collaborate with their colleagues to enact legislation that
would enable corresponding equipage of military, homeland security and
government aircraft.
AIRPORTS FUNDING NEEDS A BOOST
The Administration proposes to continue into the future the current
AIR-21 annual amount of $3.4 billion for Airport Grants. This level of
support should be increased.
The Airports Council International--North America estimates that
the actual average annual cost of airport capital development for the
years 2003-2006 has grown to $15 billion. Although Federal AIP is not
intended to pay all the capital costs of airport improvements, since
2000 when AIR-21 was enacted, and especially since the events of 9/11,
airport need for federal funding has increased significantly. On the
one hand, because airport revenues are largely tied to traffic levels,
income is down drastically since the terrorist attacks and initiation
of military action in Afghanistan and Iraq. On the other hand, costs
are way up. Approximately two-thirds of airport capital spending is for
new runways and other facilities to accommodate future growth. Most of
this work already is underway, and contract requirements including
schedules of expenditures are firm. The other one third is used to
preserve existing infrastructure and maintain compliance with
standards--also non-discretionary expenditure. Neither of these
categories of expenses fluctuates downward with traffic counts.
Meanwhile, airports are facing significant new security costs such as
terminal modifications to accommodate large baggage screening machines,
stepped up grounds and terminal security including more personnel, and
enhanced access system technology. And, we foresee that increasing
reliance on point-to-point versus connecting passenger service will
accelerate the need for improvements at airports heretofore not
anticipating significant growth. If Federal funding is continued only
at the AIR-21 level, the national system of airports will continue to
fall behind the power curve. To support recovery of the air transport
industry, the Federal Government must significantly increase--not
merely continue--its contribution toward expansion and improvement of
the Nation's airports.
AVIATION RESEARCH MUST BE REINVIGORATED
Fourth, and perhaps most important for the future of U.S. aviation,
the level of effort of FAA RE&D must be increased four- to five-fold--
that is, $400 to $500 million per year.
The Administration proposes a funding amount of $100 million for
this function. This is $25 million less than the fiscal year 2003
enacted amount, and one half the amount approved in fiscal year 2002.
This funding trend reflects an alarming deterioration in commitment of
the Federal Government to maintaining the United States on the global
forefront of aviation and aeronautical science and industry. The
Administration's fiscal year 2004 proposal is paltry by any standard,
and if approved as requested will sound the death knell for any notion
of an independent FAA R&D capability related to air traffic control.
(ATC efficiency research is ``zeroed out'' in the fiscal year 2004
proposal.) In today's ``bottom line'' business environment, and
especially with the economy in recession, private industry cannot be
counted on to fill the void.
If the United States is going to continue being the world leader in
aviation and aerospace technology, it is long past time to renew the
Nation's financial commitment to the government-sponsored research
programs needed to make that happen. This means multiplying by four or
five times the amount of money now going each year to FAA RE&D. It also
means generously supporting all manner of research being conducted by
NASA as well. Although NASA's activities cannot substitute for a
vigorous, well-funded FAA RE&D capability, in some areas of research it
offers expertise and research resources that increasingly complement
those of FAA and support FAA's mission and objectives. However, the
breadth of appropriate FAA RE&D goes well beyond NASA and DOD's
interests, and should not be dismissed.
DEVELOPING A VISION OF THE FUTURE AIR TRANSPORTATION SYSTEM
Important for the future will be a Government-wide, interagency
activity to coordinate aviation and aerospace requirements both
existing and for the future, define research needs and applications for
the next generation air traffic management system, and assemble a
unified budget report covering all aviation system funding needs.
Government-wide planning will allow various organizations to share
knowledge and facilities, avoid duplication of effort, and leverage
resources through joint and cooperative activities. The Department of
Transportation should lead the coordination activity, with the
Departments of Defense, Commerce, and Homeland Security, and FAA and
NASA participating. As part of this effort, FAA should undertake to
define the next generation air traffic management plan for the United
States, with involvement of all private sector aviation stakeholders,
members of the public, and government agencies with relevant missions.
Senate bill S. 788, the ``Second Century of Flight Act'', sponsored
by Senators Hollings, Brownback, Rockefeller, Inouye, Cantwell and
Kerry provides an excellent framework for just such a Government-wide
collaboration to enable the United States to maintain its leadership in
aeronautics and aviation. The bill would establish and fund in DOT an
``Office of Aerospace and Aviation Liaison'' to lead the interagency
coordination activity, and create in the FAA a ``National Air Traffic
Management System Development Office'' responsible for developing a
next generation air traffic system plan for the United States in
collaboration with other organizations having an aviation mission. S.
788 also would authorize for FAA RE&D expenditures $289 million in
fiscal year 2004, $304 million in fiscal year 2005, and $317 million in
fiscal year 2006. These amounts are less than ATCA advocates, but a
good start nonetheless. The Air Traffic Control Association supports
the principles stated in S. 788, and urges Congress to enact the
legislation.
CONCLUSION
Terrorism, war, and economic uncertainty have exacted a significant
toll on air transportation enterprises around the world, especially in
the United States where air carrier aircraft were hijacked to be the
instruments of attack. Among sectors of the Nation's economy, aviation
has paid more than its share of the price of those sad events. The
lasting financial and market impacts are presenting a serious challenge
for the United States in maintaining a leadership role in air
transportation and aerospace technology, working together with other
nations to achieve a safe, secure, efficient, capable, seamless global
air transportation system. With the full support of the Administration
and Congress, however, the United States can retain rather than
relinquish its stature in the world aviation community, and continue to
apply the fruits of its efforts in partnership with other nations
toward the betterment of air transportation around the world.
To that end, the Air Traffic Control Association urges Congress to
assure a robust and reliable funding stream for operations,
maintenance, and modernization of the National Airspace System, and to
initiate under the leadership of the Department of Transportation and
fully fund a government-wide Federal aviation and aerospace research
and development capability to support the air traffic management system
envisioned for the future. Together we must prepare for the future,
rather than react to the past.
MATERIAL SUBMITTED SUBSEQUENT TO CONCLUSION OF HEARINGS
[Clerk's note.--The following statement was not presented
by the publication date of Nondepartmental Statements, but was
submitted to the subcommittee for inclusion in the record:]
Prepared Statement of Gerard J. Reis, President, Strategic Technology
Enterprises, Inc.
The committee has long recognized and maintained that cabin air
quality is an important safety issue for passengers and aircrew, and
has pursued actions to support research, development, and
implementation of measures that would advance the capability to
mitigate against the threats posed by biological and chemical
contaminants. The committee's interest in these issues is well placed,
not only because of the potential risks and dangers that passengers and
aircrew may face during routine flight operations, but also because of
the safety issues that may occur as consequences of terrorist activity.
Particularly in light of the SARS outbreak, the entire issue of cabin
air quality, contamination, and decontamination has now taken on an
added dimension of significance and urgency.
The recent outbreak of SARS highlights the dangers that passengers
and aircrew may encounter from both intentional and unintentional
release of biological and chemical contaminants, particularly in an
aviation or in-flight environment. Although SARS may be a relatively
simple virus within the context of biological contaminants, its
presence and cross-border transmission alerts us to the potential
dangers that might accompany biological and chemical contamination of
aircraft and aviation assets.
In addition to the immediate dangers posed to passengers and
aircrew, we must consider the potential impacts that intentional
release of biological and chemical contaminants would have on the air
transportation network and the airline industry. A contaminated or
suspect-contaminated aircraft, filled with passengers, would present
significant challenges for the Federal Government and the various
airport authorities, and disruptions to the network. Further, there is
not at present a system, procedure, or capability to process
contaminated passengers and aircrew, nor is there a system, procedure,
or capability to decontaminate an aircraft and return it to service.
The committee understands these challenges and has actively pursued the
development of capabilities and systems to overcome the challenges and
ensure the safety of passengers and aircrew.
The Flight-100--Century of Aviation Flight Reauthorization Act as
submitted (H.R. 2115) directs the Administrator of the Federal Aviation
Administration (in Sec. 425) to perform, at a minimum, only three of
the activities called for in the report of the National Research
Council (NRC) entitled ``The Airliner Cabin Environment and the Health
of Passengers and Crew.'' The three activities specified in the
submission would involve study and analysis, which, albeit important,
would not prepare us to respond quickly and effectively to an
intentional or unintentional release of biological and chemical
contaminants. Nor would the provisions of the submitted draft
legislation develop a system, procedure, or capability to process
contaminated passengers and aircrew, or decontaminate an aircraft and
return it to service.
These are all serious deficiencies in the draft legislation.
However, the safety of passengers and aircrew, and the need to
decontaminate passengers, aircrew, and aircraft, were extensively
discussed in the NRC report and in the FAA's subsequent response to the
NRC recommendations. For example, the Airliner Cabin Environment Report
Response Team of the FAA developed a series of recommended actions to
implement the recommendations in the NRC report. These recommended
actions were submitted to the FAA Administrator by the Associate
Administrator for Regulation and Certification.
A Chemical/Biological Threat Mitigation Proposal was developed
within FAA as a safety initiative that would address two compelling
recommendations of the NRC report. These two NRC recommendations, which
are ignored in the draft legislation, support a requirement to develop
immediately a system, procedure, and capability to process contaminated
passengers and aircrew, and to decontaminate aircraft.
Technologies and capabilities are needed now to address cabin air
quality and chemical/biological threat mitigation, especially for
decontaminating exposed passengers and crew and returning contaminated
aircraft to service with minimum disruption to the air traffic network.
The Chemical/Biological Threat Mitigation Proposal reflects this
urgency. The strong recommendation was made for funding this activity
at $4.74 million in fiscal year 2004 and $6.36 million in fiscal year
2005. However, despite the FAA's public announcement\1\ that Flight-100
provides a substantial investment in safety research, Chemical/
Biological Threat Mitigation is not funded in the draft legislation.
The committee should consider authorizing these funds specifically for
this safety program, in addition to the funds requested by the
Administration.
---------------------------------------------------------------------------
\1\ DOT 22-03, ``Flight-100 FAA Authorization Proposal Charts New
Century of Safer, More Efficient Aviation.'' Office of Public Affairs,
U.S. Department of Transportation, March 25, 2003.
---------------------------------------------------------------------------
Given the quickly-changing and serious nature of terrorist threat
conditions, the deficiencies in capabilities that have been illustrated
in the SARS outbreak and in various preparedness exercises, and
considering the set of dangers inherent in routine operations and
encompassed in the subject of cabin air quality, there appears to be
more than a compelling, urgent need to fund Chemical/Biological Threat
Mitigation.
As envisioned by FAA AVR, the technology and systems needed to
perform decontamination are potentially common to cabin air quality
functions. By funding Chemical/Biological Threat Mitigation, the
committee would advance both cabin air quality and decontamination. In
any case, a genuine safety need exists to put in place capabilities
that would address decontamination of passengers, crew, and aircraft.
We cannot afford to wait for an incident to begin development of these
capabilities.
The impressive, demonstrated efficacy of Vaporized Hydrogen
Peroxide (VHP) in patented technologies developed by STERIS Corporation
presents the aviation community with a proven-effective approach for
mitigating both chemical and biological threats, as well as potentially
significant applications in cabin air quality for routine operations.
STERIS's proprietary technologies have been universally recognized as
the standard in the pharmaceutical and health care industries for the
past 10 years as highly effective and economical systems for
decontaminating and sterilizing both environments and equipment. In
addition, VHP technology can perform prophylaxis decontamination
without damaging the surfaces where the technology is employed or items
on those surfaces, including sophisticated electronic components.
Further, VHP has already demonstrated in two high profile anthrax
contamination incidents that its potential for application in
biological decontamination situations is highly significant.
Published reports of this technology's efficacy are available and
three are attached. These include ``Vapor Phase Hydrogen Peroxide
Decontamination of Food Contact Surfaces,''\2\ ``Room Decontamination
with Hydrogen Peroxide Vapor'' and ``Room Decontamination with
Vaporized Hydrogen Peroxide (VHP) for Environmental Control of Mouse
Parvovirus.'' These reports and other literature in the public domain
illustrate the potential for near-immediate aviation safety
applications.
---------------------------------------------------------------------------
\2\ McDonnell, Gerald, George Grignal and Kathy Antloga. Dairy,
Food and Environmental Sanitation, November 2002, pp. 868-873.
---------------------------------------------------------------------------
The demonstrated performance of VHP, particularly in challenging,
complex contamination situations, affords our Nation in general and the
aviation community in particular a well-developed technology that can
be applied to aircraft safety issues quickly and efficiently within the
program described in the Chemical/Biological Threat Mitigation
Proposal.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Air Traffic Control Association, Inc., Prepared Statement of the. 319
American:
Passenger Rail Coalition, Prepared Statement of the.......... 316
Public Transportation Association, Prepared Statement of the. 311
Bennett, Hon. Robert F., U.S. Senator from Utah, Statement of.... 46
Blakey, Marion C., Administrator, Federal Aviation
Administration, Department of Transportation................... 1
Biographical Sketch of....................................... 12
Prepared Statement of........................................ 8
Questions Submitted to....................................... 59
Statement of................................................. 5
Brownback, Hon. Sam, U.S. Senator from Kansas:
Prepared Statement of........................................ 124
Questions Submitted by....................................... 170
Statement of................................................. 138
Byrd, Hon. Robert C., U.S. Senator from West Virginia:
Questions Submitted by....................................... 171
Statement of................................................. 191
California Industry and Government Central California Ozone Study
(CCOS) Coalition, Prepared Statement of the.................... 315
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
Statements of................................................123, 225
Coalition of Northeastern Governors, Prepared Statement of the... 308
Durbin, Hon. Richard J., U.S. Senator from Illinois, Questions
Submitted by..................................................69, 172
Grams, Todd, Chief Financial Officer, Internal Revenue Service,
Department of the Treasury..................................... 73
Hamilton, Wendy J., National President, Mothers Against Drunk
Driving........................................................ 242
Prepared Statement of........................................ 248
Questions Submitted to....................................... 291
Hurley, Charles, Vice President, National Safety Council......... 254
Prepared Statement of........................................ 256
Questions Submitted to....................................... 296
McLean, Donna, Assistant Secretary of Transportation for Budget,
Department of Transportation................................... 119
Mead, Kenneth M., Inspector General, Office of the Inspector
General, Department of Transportation.......................... 13
Prepared Statement of........................................ 16
Mikulski, Hon. Barbara A., U.S. Senator from Maryland, Questions
Submitted by..................................................69, 111
Mineta, Norman Y., Secretary, Department of Transportation....... 119
Prepared Statement of........................................ 127
Statement of................................................. 125
Murray, Hon. Patty, U.S. Senator from Washington:
Opening Statements of..........................3, 75, 121, 177, 221
Prepared Statement of........................................ 223
Questions Submitted by..................63, 103, 276, 288, 293, 298
National Association of Railroad Passengers, Prepared Statement
of the......................................................... 301
People for the Ethical Treatment of Animals (PETA), Prepared
Statement of the............................................... 306
Railway Supply Institute, Inc., Prepared Statement of the........ 318
Reis, Gerard J., President, Strategic Technology Enterprises,
Inc., Prepared Statement of.................................... 325
Ressel, Teresa Mullet, Acting Assistant Secretary, Management and
Budget, Office of the Secretary, Department of the Treasury.... 175
Runge, Jeffrey W., M.D., Administrator, National Highway Traffic
Safety Administration, Department of Transportation............ 221
Prepared Statement of........................................ 228
Statement of................................................. 226
Sandberg, Annette, Acting Administrator, Federal Motor Carrier
Safety Administration, Department of Transportation............ 235
Prepared Statement of........................................ 237
Shane, Jeffrey N., Under Secretary for Policy, Office of the
Secretary, Department of Transportation........................ 29
Prepared Statement of........................................ 32
Questions Submitted to....................................... 70
Shelby, Hon. Richard C., U.S. Senator from Alabama:
Opening Statements of...............................1, 73, 119, 175
Prepared Statement of........................................ 224
Questions Submitted by.....59, 70, 96, 150, 213, 270, 284, 291, 296
Snow, Hon. John, Secretary, Office of the Secretary, Department
of the Treasury................................................ 175
Prepared Statement of........................................ 180
Statement of................................................. 179
Specter, Hon. Arlen, U.S. Senator from Pennsylvania:
Question Submitted by........................................ 169
Statement of................................................. 193
Stevens, Hon. Ted, U.S. Senator from Alaska:
Questions Submitted by....................................... 102
Statement of................................................. 148
University Corporation for Atmospheric Research, Prepared
Statement
of the......................................................... 309
Wenzel, Robert E., Acting Commissioner, Internal Revenue Service,
Department of the Treasury..................................... 73
Prepared Statement of........................................ 78
Statement of................................................. 76
SUBJECT INDEX
----------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
Page
Building on a Good Foundation.................................... 78
Business Systems Modernization..............................87, 94, 113
Campus Consolidation............................................. 93
Compliance....................................................... 81
Continued Investment in Business Systems Modernization (+65
Million and 0 FTE)............................................. 83
Customer Service................................................. 93
Earned Income Tax Credit......................................... 89
Electronic Filing................................................85, 97
Excise Tax Calculation........................................... 102
Fiscal Year 2004 Resource Request................................ 80
Free File Initiative............................................. 86
Has the IRS Improved its Customer Service?....................... 108
Impact of Unforeseen Costs on Staffing Levels.................... 84
IRS:
Financial Management......................................... 111
Free File Initiative......................................... 92
Modernization................................................ 109
On Privatizing Tax Collection................................ 111
Modernization.................................................... 99
Modifications to the IRS Restructuring and Reform Act of 1998
(RRA 98)....................................................... 85
Offers in Compromise............................................. 95
Private Collection Agencies.....................................88, 100
Public Employees Retirement Systems Ruling....................... 102
Reinvestments.................................................... 82
Security......................................................... 96
Should the IRS be Allowed to Use Private Collection Agencies
(PCAs) to Help Collect Delinquent Tax Debts?................... 104
Will the IRS Try to Increase Earned Income Tax Credit (EITC)
Participation?................................................. 103
Office of the Secretary
Accounting Profession and Capitalism............................. 199
Byrd Amendment................................................... 211
Debt Limit....................................................... 206
Deficits......................................................... 203
Departmental Offices............................................. 213
Earned Income Tax Credit (EITC)................................186, 187
Economic Sanctions Against Iraq.................................. 200
Economy...................................................193, 196, 210
Ensuring the Tax System is Fair for All Through a Comprehensive
Compliance Effort.............................................. 181
Establishment of a Central Bank in Iraq.......................... 209
Executive Office for Terrorist Financing and Financial Crimes.... 186
Extraterritorial Income (ETI).................................... 190
FinCEN........................................................... 215
Flat Tax......................................................... 196
Foundation for Success--The President's Management Agenda........ 184
Global Economies................................................. 199
Internal Revenue Service......................................... 215
Maintaining the Integrity of Our Nation's Financial Systems and
Safeguarding Our Nation's Currency............................. 183
New $20 Bill..................................................... 208
President's Tax Package.......................................... 185
Private Collection Agencies...................................... 191
Privatization of Tax Collections................................. 195
Providing Economic Security, Jobs, and Growth.................... 181
Rebuilding Iraq.................................................. 202
Restructuring Treasury........................................... 184
Serving a Critical Role in the Financial War Against Terrorism... 182
Tax:
Bill......................................................... 203
Cut.......................................................... 194
Terrorist Financing.............................................. 207
U.S. Currency Circulation in Iraq................................ 209
DEPARTMENT OF TRANSPORTATION
Additional FTE's................................................. 154
Adoption of Safety Countermeasures............................... 156
Airline Industry Subsidies....................................... 148
Airport Competition.............................................. 142
Amtrak....................................................126, 132, 133
Reform Proposal.............................................. 150
Areas Currently Eligible for CMAQ Funding........................ 160
ASR-11........................................................... 137
``At-Risk'' Mega Projects........................................ 166
Aviation......................................................... 131
Industry..................................................... 138
Related Research............................................. 139
Border Planning, Operation and Technology Program................ 160
Colorado Blood-Alcohol Standards................................. 137
Commercial Passenger Aircraft Fuel Tank Safety................... 169
Competitive Sourcing............................................. 171
Congestion Mitigation............................................ 159
Context Sensitive Solutions...................................... 165
Ecosystem and Habitat Conservation Initiatives................... 163
Environmental Streamlining....................................... 167
FAA Operational Errors........................................... 142
Federal Aviation Administration Reauthorization.................. 132
Fiscal Year 2004 Funding Request for Amtrak...................... 172
FTE Distribution................................................. 168
Highway:
Performance and Maintenance Initiative (IPAM)................ 153
Reauthorization.............................................. 129
Related Fatalities........................................... 152
Safety Initiatives........................................... 150
Hours of Service................................................. 136
Improving Pavement Ride Quality.................................. 153
Infrastructure and Performance Maintenance Initiative..........131, 150
Intelligent Vehicle Initiative................................... 155
Intersection Safety.............................................. 158
Maritime Administration Title XI Program......................... 141
Mega Projects Oversight.......................................... 165
New Entrant Program.............................................. 141
Overseas Repair Facilities....................................... 173
Patriot Act...................................................... 153
Pedestrian and Bicyclist Safety at Intersections................. 158
Reauthorization of Surface and Aviation Programs................. 126
Requirements for Amtrak to Receive Federal Subsidy............... 153
S. 788 Century of Flight Act..................................... 171
Ship Disposal.................................................... 151
Short Line Railroads............................................. 170
Small Community Air Service...................................... 173
Sound Transit.................................................... 135
Southern Border.................................................. 148
SR 210/Foothill Freeway Additional FTE........................... 167
State:
Spending on Hazard Elimination Projects...................... 157
Strategic Highway Safety Plans............................... 159
Strategic Highway Network........................................ 165
The Administration's Vision for Intercity Passenger Rail......... 172
Tracking of Hazardous Material................................... 149
Transit Reauthorization.......................................... 147
Truck Monitoring................................................. 148
Upgrading and Protecting the Existing Information Resource
Management Infrastructure...................................... 169
Federal Aviation Administration
A Safer, Simpler, Smarter and More Business-like FAA............. 11
ACE-IDS.......................................................... 69
Aerospace Commission............................................. 63
AIP and Security Related Funding................................. 55
Air Traffic:
Control as a Commercial Activity............................. 65
Modernization................................................ 68
Airport(s):
Improvement Program.......................................... 66
Which Will Benefit from New Runways.......................... 70
Aviation Trust Fund Reductions................................... 63
Budget........................................................... 9
Capacity......................................................... 7
Building..................................................... 49
Carrier Safety Oversight......................................... 64
Chief Operating Officer.......................................... 63
Controller Retirements........................................... 63
Cost Accounting System........................................... 62
Environmental Review Process For:
Airport Projects............................................. 66
Capacity Projects............................................ 59
FAA's Oversight of Foreign Repair Stations....................... 58
Financial Management and Costs Control........................... 7
Fiscal Year 2004 Budget Request.................................. 5
Graphic Advisories for General Aviation Pilots................... 67
Most Important Air Traffic Control Projects...................... 54
Oceanic Air Traffic.............................................. 61
Operational:
Efficiency in the NAS........................................ 69
Errors and Runway Incursions................................. 62
Evolution Plan............................................... 41
Oversight of Foreign and Domestic Repair Stations................ 64
Performance-Based Pay System..................................... 8
Reauthorization.................................................. 9
Proposal..................................................... 5
Repair Stations.................................................. 58
Revision of the Operational Evolution Plan....................... 65
Rising Operating Costs........................................... 42
Safer, Simpler, Smarter.......................................... 9
Safety........................................................... 6
San Juan County's Airspace Frequency............................. 67
Status of the ASR-11 Radar and Stars............................. 65
Wake Turbulence Research......................................... 62
Working Group on the Airline Industry's Financial Crisis......... 69
Federal Motor Carrier Safety Administration
Additional Committee Questions................................... 284
Commercial Drivers License (CDL) Grants.......................... 239
HAZMAT Safety and Security....................................... 238
Household Goods Enforcement...................................... 239
Medical Programs................................................. 240
New Entrant Program.............................................. 237
Organizational Excellence........................................ 240
Regulatory Development........................................... 239
Southern Border Enforcement...................................... 238
National Highway Traffic Safety Administration
Additional Committee Questions................................... 270
Blue Ribbon Commission on Highway Safety......................... 283
Budget Reductions in Impaired Driving Program.................... 265
Child Safety Seats............................................... 274
Coordinated Governmental Effort to Fight Drunk Driving........... 281
Crash Causation.................................................. 280
Diverting Impaired Driving Funds................................. 267
Emergency Vehicle:
Crash Avoidance Technologies................................. 264
Sensors...................................................... 263
Flexibility and Accountability................................... 268
High Visibility Enforcement for Impaired Driving................. 263
Highway Safety:
Grant Funding Levels......................................... 272
Initiatives.................................................. 272
Impaired Driving................................................. 273
Increase of Alcohol-Related Fatalities........................... 279
Motorcycle:
Fatalities................................................... 262
Fatality Increases........................................... 277
NHTSA Efforts to Improve SUV Safety/Reducing Rollovers and
Aggressivity................................................... 282
NHTSA's:
``Checkpoint Strikeforce'' Campaign.......................... 280
Oversight of State Safety Programs........................... 279
Paid Advertising Program..................................... 277
Occupant Protection.............................................. 274
Program Highlights............................................... 230
Reauthorization Proposal Effect on Impaired Driving Program...... 266
Safety Belts..................................................... 272
Share the Road................................................... 276
State Data Accountability........................................ 267
Steps NHTSA is Taking to Improve Vehicle Blind Spots............. 282
Top Priorities for NHTSA and FMCSA's Safety Regulatory Agenda.... 281
Office of the Inspector General
AIP Spending..................................................... 57
Aviation Safety.................................................. 28
Building Aviation System Capacity and More Efficient Use of
Airspace to Prevent a Repeat of the Summer of 2000............. 26
Controller-In-Charge Program and Operational Errors.............. 56
General State of FAA............................................. 19
Making FAA a Performance-Based Organization Through Controlling
Costs in Operations and Major Acquisitions..................... 22
Rising Operating Costs........................................... 42
Service to Small and Medium Sized Communities.................... 19
Stars and Other Programs' Cost Growth............................ 57
State of the Airline Industry.................................... 17
Striking a Balance Between How Airport Funds Will Pay for
Capacity and Security Initiatives.............................. 27
Office of the Secretary
Administration's:
Position on Airline Aid...................................... 53
Representative............................................... 50
Airline Industry................................................. 48
Business Travelers............................................... 47
FAA Management of Procurement.................................... 70
Government Intervention.......................................... 51
Post-9/11 Impact on Aviation Industry............................ 44
Reimbursement to the Carriers.................................... 40
Relief:
Package for Aviation Industry................................ 42
To the Airline Industry...................................... 40
Role of the Office of the Secretary in FAA Matters............... 70
Supplemental Appropriations Act.................................. 45
The Future of the U.S. Aerospace Industry........................ 71
TSA.............................................................. 48